JSE-listed technology group Altron looks set to list its UK subsidiary, Bytes Technology Group, in an effort to further unlock shareholder value.
After a review, the board has concluded that the “true value of Bytes UK, a wholly owned subsidiary of Altron, is not reflected in the company’s share price”, it said in a statement to shareholders on Thursday.
“This business has increasingly developed a growth trajectory and strategic levers that are different to the rest of the group and it operates in a different geographical capital market with a highly rated peer group,” Altron said.
As a result, the board has decided to pursue a potential listing and share offering of Bytes UK on the London Stock Exchange; a secondary listing of Bytes UK on the JSE; and an unbundling of the remaining Altron shareholding in Bytes UK to Altron shareholders.
The primary listing of Altron on the main board of the JSE will be retained.
“While the board is cognisant of the current state of capital markets and the impact of market conditions on the success of the potential transaction, it has deemed it appropriate to commence with the necessary preparation for the potential transaction,” it said. “This preparation is likely to take between nine and 12 months to complete.”
Altron will reassess market conditions after completion of this work.
Ahead of the possible London listing, Altron will constitute an independent board of directors for Bytes UK; separate Bytes UK from all group functions; conclude arrangements with the Bytes UK management team, consistent with an independent company; and separate all Bytes UK operational functions to ensure a standalone operational business.
Altron has appointed Rand Merchant Bank as financial advisor and transaction sponsor in respect of the potential transaction in South Africa, and is in the process of appointing an advisor in the UK to advise Bytes UK.
Bytes Technology Group was established in the UK in 1982. The business is focused on software licensing, software asset management, security solutions, cyber consulting services, and public cloud migration and management. It has more than 7 500 customers, predominantly in the large and medium enterprise space, and is well represented in national and local government. Bytes UK represents over 100 software vendors. It is ranked as Microsoft UK’s top cloud reseller.
In the 2019 financial year, Bytes UK contributed 41% of Altron revenue and 23% of earnings before interest, tax, depreciation and amortisation (Ebitda).
“The strong leadership team is diverse, experienced and well-positioned to take the company forward. The team is fully supportive and see the benefit of the opportunity of operating as a listed standalone business in the future,” Altron said.
Altron chairman Mike Leeming and CEO Mteto Nyati said in the statement: “In addition to the value created to date, through delivering on the One Altron strategy, the unbundling and listing of a fully independent Bytes UK has the potential to unlock further value for Altron shareholders and, at the same time, to create a successful standalone business operating in the UK.”
The company emphasised that it will remain a significant player in South Africa’s IT market. “In 2019, Altron, excluding the Bytes UK business, achieved revenue of over R9-billion and Ebitda of over R1.2-billion and will remain a market-leading and well-positioned business in its chosen African markets.” — © 2020 NewsCentral Media
Duncan McLeod is Editor of TechCentral
This article was first published on TechCentral here.