AAT sale bolsters Altech`s cash reserves

Johannesburg, 19 Jun 2002

JSE-listed telecoms company Altech will sell its 40% stake in Alcatel Altech Telecoms (AAT) in a deal that will net it R335.5 million.

In March, Altech announced its intention to sell its stake in the joint venture between itself, Alcatel France and empowerment group Rethabile.

Altech will exercise its put option as specified in the original shareholder agreement in order to sell its stake in AAT, leaving French partner Alcatel with an 80% shareholding in AAT.

The sale will have no impact on empowerment company Rethabile`s existing 20% shareholding in the telecoms company.

Independent advisor Rand Merchant Bank calculated the price of the deal, which amounts to R39.2 million multiplied by 8.55. The latter figure was determined to be an average price to earnings multiple traded at by similar telecommunications companies on the local stock exchange operating in a similar space to AAT.

Salient figures released by Altech to the investment community show the company`s headline earnings per share, sans AAT, at 288.4c, compared to 268.1c with AAT`s results included. This is based on a pro forma calculation assuming the deal had been concluded in March last year.

At the time of Altech`s original announcement of the sale, the JSE-listed company expressed its desire to exit the nine-year involvement in AAT due to AAT`s perceived uncertain future performance.

Altech CEO Craig Venter also pointed to AAT`s shrinking contribution to the group`s revenue stream, as well as Altech`s desire to utilise the cash generated from the deal to fund its future growth.

International expansion has been a priority for Altech of late, and the company would need exponentially more reserves to fund any global growth, given the weakness of the local currency.

Altech ended its last financial year with cash and cash equivalents of R597.7 million, and the additional R335.5 million will make a significant addition to the company`s coffers. The price negotiated for the deal is just short of the cash generated by operations for the company`s last financial year (R344 million).