| Wed 1 Apr 2009, 16:00 | | ALT - Altech - Altech Acquires Technology Concepts |
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ALT - Altech - Altech Acquires Technology Concepts
Allied Technologies Limited
Member of the Altron Group
Incorporated in the Republic of South Africa
Registration number: 1946/020415/06
Share code: ALT
ISIN number: ZAE000015251
("Altech" or "the Company")
ALTECH ACQUIRES TECHNOLOGY CONCEPTS
JSE listed Allied Technologies Limited (Altech), today announced the acquisition
of 100% of the equity in and claims against Lateral Technology Concepts (Pty)
Ltd (Technology Concepts), an internet service provider (ISP) and information
technology company, subject to the fulfillment of normal conditions precedent.
As a result of the changed regulatory landscape, moving into internet service
provision is a natural extension of Altech`s existing business.
"We have been interested in purchasing an ISP for some time. As a result of the
changed regulatory landscape, moving into internet service provision is a
natural extension of Altech`s existing business. Through the strong distribution
footprint in Altech and in particular Altech Autopage Cellular, which has
approximately one million corporate and retail clients, we are in a position to
rapidly scale Technology Concepts by introducing new internet services to these
clients," commented Altech`s Chief Executive Officer, Craig Venter.
BACKGROUND ON TECHNOLOGY CONCEPTS
Founded in 1999 by Wayne de Nobrega, Technology Concepts, a second tier
corporate internet technology and services business, has a full range of ISP
products, services and solutions which are developed and managed in-house. The
company has been awarded its own VANS license and has built its own hosting
infrastructure. Technology Concepts is divided into two distinct divisions: ISP
and Support services and Web Software Development. The ISP and Support Services
Division generates annuity income from the provision of internet access, MPLS
networks, managed firewall services, hosted and archived email, data centre
hosting and automated off-site backups. The Web Software Development division
offers development expertise in both Linux - PHP - mySQL and Microsoft.Net
environments as well as internet, intranet and web based applications. In
addition to these two divisions the company sells hardware, software and
technical services that are needed to support its various activities.
Technology Concepts` distinguishing product is its Channel Bonding technology
which was launched 20 months ago and which combines multiple ADSL`s to create a
single, virtual high speed connection, enabling customers to have high bandwidth
at a fraction of the normal cost associated with a leased line solution.
INVESTMENT RATIONALE AND SYNERGIES
Altech recognises the developing convergence of voice and data in the telecoms
arena and the increasing demand for bundled services. The rationale to acquire
Technology Concepts is motivated by the need to include fixed line internet
connectivity and value added services so that Altech, through Altech Autopage
Cellular, may provide a wide range of services to SME`s and corporate customers.
Technology Concepts` client base of 270 customers, consisting of high average
revenue per user (ARPU) SME`s and corporate customers was a natural choice for
Altech`s strategic diversification plans. Given the number of products and
services being sold into these customers they are unlikely to churn. Although
Technology Concepts` focus has been primarily on high margin and high ARPU
customers, the company also has the expertise to drive a retail offering.
"About 64% of Technology Concepts` business is annuity based and, although it is
within a competitive market, is showing high profit growth. The acquisition thus
ensures a regular and consistent income stream for Altech which will positively
affect our headline earnings per share," said Venter.
Technology Concepts have a strong management and technical team that are willing
to stay on to drive the business post acquisition, ensuring continuity and
stability.
The acquisition allows Altech to expand its required data skills through, inter
alia, ISP product management, data product development, sales, pre-sales
support, after-sales service, ISP billing and general ISP management.
PURCHASE CONSIDERATION AND TERMS
The deal sees Altech acquiring 100% of the equity in and claims against
Technology Concepts for a maximum purchase price of R45 million to be paid in
terms of an earn-out mechanism, payable over two years. The deal ensures that
Altech acquires full Intellectual Property Rights ("IPR`") through Technology
Concepts.
Of the total R45 million, an amount of R7.5 million will be paid initially,
(i.e. after the fulfillment of the specified conditions precedent). The
remaining R37.5 million, will be released to Technology Concepts shareholders as
an earn-out over two years based on profit after tax (PAT) targets being
achieved.
If all profit warranties are met, the effective (PAT) PE multiple to be paid by
Altech will be 5.23.
Through the acquisition of Technology Concepts, Altech is able to obtain key
experience in ISP and data management, acquire a new data sales channel and
differentiate itself in the market through unique products and services whose
profits stem mainly from annuity revenue corporate business. Furthermore, the
transaction affords the opportunity to develop a competitive consumer ISP
offering to Altech Autopage Cellular`s existing client base, ensuring it has a
full range of connectivity products and services, and enabling the company to
live up to its promise of "Value Added Connectivity."
The acquisition is a part of Altech`s overall data strategy, taking into account
its recent attainment of an I-ECNS license and the imminent landing of the
SEACOM submarine cable in South Africa and then continuing up the African east
coast. It complements Altech`s extensive data network and ISP operations in
East Africa and is a reflection of Altech`s expectation that there will be
explosive growth in the demand for data services in Africa.
"Acquiring Technology Concepts allows Altech to obtain significant experience in
ISP and data management. We will also have the ability to export the systems
imbedded in Technology Concepts e.g. the billing platform to other geographies
where Altech is present, like East Africa. This transaction forms part of an
overall solution to bring data connectivity to the end customer via copper
solutions, fibre and wireless network links," concluded Venter.
Altech is listed on the Johannesburg Stock Exchange (JSE) and is an investment
holding company, involved in the telecommunications, multi-media and information
technology industries, which employs over 5000 employees in South Africa and
abroad.
As a leading South African multi-billion rand high-technology group, Altech is
involved in the design, development and convergence of telecommunications
equipment, multi-media systems and IT solutions. There is a strong focus on the
convergence of these technologies and Altech is now also entrenched in the arena
of secure technology solutions.
Altech has ongoing access to the latest technologies worldwide, while the
group`s own research and development programmes actively encourage and promote
internal technology advances.
FOR MORE INFORMATION PLEASE CONTACT:
Craig Venter: Chief Executive Officer
TEL: (011) 715-9004
FAX: (011) 715-9045
CELL: 083 236 8000
EMAIL: cventer@altech.co.za
OR
Andy Baker: Chief Operating Officer
TEL: (011) 715-9023
FAX: (011) 715-9047
CELL: 083 657 2886
EMAIL: abaker@altech.co.za
1 April 2009
Investment bank and Sponsor: Investec Bank Limited
Date: 01/04/2009 16:00:04 Produced by the JSE SENS Department.
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