| Tue 20 May 2003, 16:55 | | Altron laughs off rumours of its planned acquisiti |
|
A reliable source confirms Comparex is being courted by Bytes Technology, a company in the firm's stable
Information Technology Editor
IN THE past few weeks, Altron CEO Robbie Venter has heard rumours that his company is on the acquisition trail.
Not for the small fry companies littering the JSE Securities Exchange SA, but for some seriously big fish. "I've heard rumours that we are planning to buy Dimension Data, Datatec, Comparex, MGX and AST," he says. It is easy to laugh that off, partly because of the prohibitive scale of such moves, and more sensibly because the groups contain eclectic operations that Altron has no interest in.
Yet a reliable source insists that Comparex is indeed being courted by Bytes Technology, one of the companies in the Altron stable. But could Bytes seriously try to swallow something the size of Comparex?
Comparex CEO Peter Watt says the companies are not in talks. "I have heard some little birds fluttering around saying it would be a good idea but I don't see Bytes as an IT company. It might bulk things up, but it wouldn't add anything in terms of capabilities," he says.
Bytes may have the ambition, but it certainly does not have the cash, he says. Watt believes that Bytes has mooted the takeover idea with Allan Gray, the institutional investor with shares in both companies. Clearly, a bid for Comparex would have to be voted on by shareholders, who may see a better fit between the two than Watt cares to accept.
One source believes the move would make sense, as the groups have different skills that could interlock rather than overlap.
Bytes chairman David Redshaw makes no secret that he is in an acquisitive mood, although he will not be drawn on the potential targets. But he is an ambitious man, keen to drive Bytes to the top of the heap.
Despite debts of R500m, Redshaw says that if an opportunity too good to ignore arises, he could raise cash through a rights issue or by borrowing from Altron, which holds 54%.
Altron itself has R700m in cash, and has acknowledged that there are some excellent, albeit large, acquisition opportunities. Moreover, Robbie Venter is pushing for Bytes to grow substantially in the next 18 months. Bytes has been eyeing the assets of technology groups such as AST and MGX, whose financial troubles are forcing them to sell their assets to survive. While these groups obviously want to sell units that are unprofitable or do not fit with their core operations, the depths of their woes may force them to kiss goodbye to some of their more desirable divisions.
But Comparex is in a different league. It has a market capitalisation of R1,7bn despite sitting on R1,8bn in cash.
So it is trading at a discount to its cash in hand, without even considering the value of its operations. A take-over bid would have to be at a substantial premium to its share price for shareholders to take it seriously.
Its turnover for the six months to November last year hit R2,4bn, although it suffered an operating loss of R83,8m as it shed the final vestiges of its cash-draining European arm.
Bytes reported a turnover of R3bn for the year to February 28 this year, so a merger would create a giant with a revenue approaching R7bn.
That would still be dwarfed by the globally active Dimension Data and Datatec, but the source says the size and scope of its combined skills would make it a formidable player in SA, boosted by further opportunities to rationalise their structures.
Barnard Jacobs Mellet analyst Craig Hackney says he would not be surprised if Bytes was trying to woo Comparex. "It could make great sense from Bytes' point of view but I get the idea that Comparex isn't too interested," he says. "Comparex has enough critical mass and it doesn't need all the risks that go with a merger.
"The only thing it needs is empowerment."
The Bytes balance sheet is stretched already, and the risks are too great to justify borrowing more cash to make the move, Hackney says. And assessing the feasibility of a rights issue is academic if Comparex does not want to be bought.
May 20 2003 06:59:14:000AM Lesley Stones Business Day 1st Edition
Tuesday
20 May 2003
