JSE-listed AYO Technology is buying a 30% stake in British Telecoms South Africa (BTSA) from its parent company, for a subscription price of R990 million.
AYO is a broad-based black economic empowerment ICT group offering a number of end-to-end solutions to various industries. AYO was previously called Sekunjalo Technology Solutions and is a subsidiary of JSE-listed African Equity Empowerment Investments (AEEI). AYO listed in the computer services sector of the JSE in December 2017.
BTSA is part of BT Limited, a global leader in managed network IT services, operating globally and delivering end-to-end ICT solutions locally. BT has been present in SA for more than 16 years and is continuing to expand its operations in Sub-Saharan Africa.
BTSA is not to be confused with Bridging Technologies SA (BT-SA) which specialises in ICT infrastructure and support services.
AYO Technology is effectively buying the 30% stake from its parent company AEEI and made its intentions for the acquisition known in its pre-listing statement published last year. At the time, it said it had entered into a non-binding memorandum of understanding (MOU) with Kilomax Investments, a wholly-owned subsidiary of AEEI that owns 100% of Kilomix Investments, which in turn owns 30% of BTSA.
In terms of that MOU, AYO Technology agreed to enter into a binding agreement to subscribe for 9 900 ordinary shares, constituting 99% of the issued share capital of Kilomix following their issue. On 25 May, the binding subscription agreement with Kilomax and Kilomix came into force. The subscription price is R990 million and will be settled in cash.
AEEI says the rationale behind the deal is because the company wishes to hold all of its technology investments in one vehicle, namely AYO.
In addition to being an equity holder in BT, AYO Technology in December also entered into the BT Alliance Agreement, in terms of which AYO Technology will be one of BT's strategic partners in SA.
AYO says the strategic relationship and incorporation of the BTSA products and services into the AYO ecosystem has the potential to unlock significant market share and growth for AYO. The combined products and services of the two groups and AYO's empowerment credentials will allow it to target large multinationals operating in SA, the group says.
According to AEEI's interim results for the six months ended 28 February, published last week, the AYO group increased its profit by 173% from R30 million to R82 million for the period under review. AEEI said AYO is concluding discussions with several complementary acquisition targets which will augment its go-to-market strategy.
AYO says the value of the net assets attributable to Kilomix, as at its audited financial year ending 31 August 2017, was R784.5 million and the profit after tax attributable to Kilomix was R473.5 million.
AYO's stock was trading at R35 per share on the JSE this morning and has fallen by nearly 19% since listing. The group's market cap is currently sitting at around R12 billion.