By Maano Andy Thovhakhale
On 28 October 2022, Altron Group announced that it had entered into a sale of business agreement, through its wholly owned subsidiary, Altron TMT, with NCR Corporation, through its wholly owned subsidiary Spark ATM Systems, in terms of which Altron Group will sell, as a going concern, to NCR for a consideration capped at a maximum sum of R181m.
The ATM hardware and support business of ATMT’s Altron Managed Solutions division.
The net book value of the balance sheet items related to the Transaction as at 31 August 2022 amounted to R238,3 million. For the six months ended 31 August 2022, the AMS ATM Hardware and Support Business generated revenue of R544,6 million, EBITDA of R36,6 million and Operating Profit of R23,2million.
Mteto Nyati stepped down from his role as CEO of Altron after a five-year tenure.
Mteto Nyati revolutionized Altron through;
- demerger and separate listing of Bytes
- bolt-on acquisitions and disposals
- winning lucrative contracts (worth a read)
- Mteto Nyati started his 5 year tenuer CEO of Altron back in April of 2017. He has held numerous positions most noticeable was as CEO of MTN SA and MD of Microsoft SA for 6years. He is the author of the number one bestseller, “Betting on a Darkie”.
- 1) demerger
- At end of FY20, Altron’s Value Capital Partners directors shared with the board a sum-of-the-parts (SOTP) analysis of the Altron group and when compared with the group’s market cap, it was clear that the Bytes UK business was not being fairly valued by the market.
The board decided on a demerger of Bytes UK in order to unlock value for its shareholders. The Bytes UK leadership was briefed on the decision and embraced the demerger. The Bytes UK leadership was supported by RMB, Numis, DLA Piper, Value Capital Partners and Altron board.
It was also decided that Bytes will have its primary listing on the Main Market of the London Stock Exchange and the JSE by way of a secondary inward listing.
Bytes listed at a price of £2.70 (R54) per ordinary share of Bytes and resulting in a market capitalisation of approximately £647m (R13bn) on admission to the LSE.
Bytes UK was renamed Bytes Technology Group Plc.
Immediately after the demerger and separate listing of Bytes, the total market cap of Bytes and Altron stood at R20.5bn up from the R7.5bn before the demerger.
Bytes market cap was R16.5bn while Altron’s was R4bn. End of FY21, market cap to R24.5bn with Bytes’s at R19.8bn.
A watered-down summary of the demerger:
Step 1: Altron sells Bytes UK to Bytes Technology Holdco, a wholly owned subsidiary of Bytes Technology Group plc. Altron (through its subsidiaries) received Convertible Notes issued by Bytes in consideration for its shares in Bytes UK.
Step 2: Altron distributed Bytes Convertible Notes as a distribution in specie to Altron’s shareholders in the ratio of 0.5 convertible note for every one Altron ordinary share held. Demerger created R13bn in value for shareholders. Goverance of was also separated as follows:
- an independent board of directors for Bytes UK,
- separation of Bytes UK from all group functions,
- concluding arrangements with the Bytes UK management team and
- separating all Bytes UK operational functions to ensure a standalone operational business.
2) Engaging in bolt-on acquisitionswhere they fell into Altron’s targeted growth areas and to achieve the financial goals of doubling EBITDA within five years, deliver leading returns for shareholders.
A look at those bolt-on acquisitions made in FY20-21;
- acquired 100% of Gydan Investments (RF), including, inter alia, its wholly owned subsidiary, Ubusha Technologies (Ubusha) for R367m of which R259m was paid upfront. Fair value of the acquired brands and customer relationships of R56m was recognised with deferred tax of R16m.
- through its wholly owned subsidiary, Altron TMT Proprietary Limited, acquired the business of XDN, the Xerox dealership in Durban, for a final purchase consideration of R15 million. The fair value of the acquired brands and customer relationships of R21 million.
- acquired 25% + one share of the issued shares of Nexus for R30m, bringing the group’s total share to 100%.
- Jun 2020, Altron acquired an additional 5% of Netstar for R4m, bringing the group’s total share to 8% minus one share.
- October 2020, the group acquired an additional 20% plus one share of the issued shares of Netstar for R50 million, bringing the group’s total share to 100%
- August 2020, the group acquired 25% plus one share of the issued shares of UEC for a nominal amount, bringing the group’s total share to 100%.
- Altron acquired Lawtrust for R245m when value of the net assets of Lawtrust was R102m. Lawtrust is a provider of a range of security services in the IT sector such as authentication, encryption, digital signatures and biometrics.
3) Top 21 contracts won in FY21;
- SA Taxi contract worth R250 million over six years (Netstar)
- Three-year Toyota Malaysia contract valued at R200 million (Netstar)
- Capitec NCR recycling ATMs and CIMA coin-accepting devices contract worth R174m (Altron Managed Services)
- Gauteng Department of Education managed mobile internet SIMs contract worth R114m (Altron Nexus)
- MultiChoice Genesys Cloud Solution contract worth R73m
- Netstar Australia was awarded an Energy Queensland contract worth R50m
- Broadnet provision of Motorola capacity max radio solution worth R50m
- Renewed a 5yr contract with PUTCO worth R100m (Netstar)
- Consumer identity and account management contract worth R63m
- Nedbank enterprise authentication engine contract worth R70m
- Limpopo Connexion microwave infrastructure contract worth R58m
- Gautrain DMR system and radios contract to the value of R29m (Altron Nexus)
- JMPD/MTC multimode radios supply R26m contract
- Nedbank NCR ATMs and GRG branch transformation R65m contract
- FNB NCR recycling ATMs and GRB bulk cash recyclers R77m contract
- Standard Bank EDW technology refresh R43m contract
- MultiChoice SDWAN solution R43m contract
- Dept of Home Affairs Hanis 2yr contract – R38m
- Vodacom ER RFP contract – R35m
- Pick n Pay NCR POS contract – R38m
- Mass POS technology refresh contract – R20m.
Altron 2.0 strategy successfully delivered the disposal of non-core assets, the rationalisation of operations and the execution of targeted acquisitions in high-growth areas.
South Africa represents 52% of Altron’s global business with a revenue of R8 billion.
Altron achieved a total shareholder return of 26% per annum over three years with the return on capital employed increasing from 6,3% to 20,8% over the same period.
Mteto Nyati can take a bow for the remarkable work he has done in the last 5 years.
Follow Maano Andy Thovhakale’s regular LinkedIn newsletter, “Deal Zone”, by clicking here.