JSE-listed Allied Technologies (Altech) is reportedly in negotiations for the acquisition of an unlisted Kenyan company, and will pay up to $60 million for the entity.
According to a Reuters report, published on Tuesday, Altech, a $742 million telecoms and IT firm, has been in talks to buy Kenyan IT company Symphony for several months now, and is nearing the end of the parley.
The Kenyan firm is headquartered in Nairobi and also has operations in Uganda, Rwanda, Burundi and Ethiopia.
“According to a person familiar with the matter, [the deal is] to help revive [Symphony's] struggling business in fast-growing East Africa,” stated the report. The source reportedly declined to be identified due to the fact that the information is not yet public.
The source said Altech is likely to pay between $50 million and $60 million for Symphony, “giving it a price-to-earnings ratio in the teens”. The acquisition would augment Altech's existing business in a region where it has struggled, says Reuters.
In September, Altech made a number of replacements at its underperforming Kenyan data business, Kenya Data Networks (KDN), and named a new team to lead its East African operation.
At the time, Altech CEO Craig Venter said: "[The replacement and new executive management team are an attempt to] get the East Africa business back on track. Our operations in East Africa will be rectified. East Africa is still our growth engine."
Reuters says South African firms are increasingly looking to do deals beyond their crowded home market to tap into the rising disposable incomes in poor but fast-growing regions such as East and West Africa.
According to Thomson Reuters data, the deal would be one of these acquisitions made by a South African company in Kenya. “[It will also be] the second-largest M&A [merger and acquisition] deal in Kenya this year, following East African Breweries' $225 million buy-back of an asset stake from SABMiller.”
Following the Reuters report on the deal, Altech shares gave up some of their gains. The shares were up 0.5%, at R52.97, at 10:55am GMT, down from a gain of 2.8% before the news.
Altech could not release any details, as the process is “not at the public stage of the process yet”.
Venter said: “Altech explores viable opportunities for growth and expansion within the telecommunications, multimedia and information technology sectors. As a listed company on the JSE, any announcements with regard to mergers or acquisitions are made in accordance to JSE-listing requirements. As such, Altech has no comment on this matter at this time.”
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