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DigiCore gets R1bn US offer

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 05 Jun 2015
DigiCore says Novatel has not yet signed a firm buyout offer.
DigiCore says Novatel has not yet signed a firm buyout offer.

DigiCore has alerted shareholders that it has received a R994 million offer from US-based Novatel Wireless.

The company says in a cautionary announcement issued this morning that Novatel, which provides broadband solutions to connect devices across the Internet of things, wants to buy DigiCore stock at R4 a share.

Based on the number of shares in issue, this values DigiCore at R995 million. Its market capitalisation is R659 million as its shares closed at R2.65 last night, making the offer a 66% premium on yesterday's close.

Novatel, which is listed on the Nasdaq, is finalising funding of the proposed deal. The US company has already concluded "substantial" due diligence and did not find any material issues with DigiCore.

However, DigiCore cautions, although negotiations are at an advanced stage, no final binding agreement has been concluded and it has not yet received a firm intention from Novatel. "There is no certainty that the negotiations or a final binding agreement will be successfully concluded (or firm intention offer received)."

Turning around

DigiCore, which plays in the vehicle tracking space, recorded a 5% revenue gain in the six months to December, taking its top line to R450.7 million, while net profit gained from R21 million to R26 million.

Among its highlights of the first six months of the year were the "long-anticipated turnaround" of its international operations, an increase in revenue generated from the insurance industry, growth in the stolen vehicle response market, and gains from its cost-saving initiatives.

The company reported pre-tax profit of R29.7 million, R7.5 million of which came from its international operations. This was a "welcome reversal" from the year-ago loss of R3.5 million, it said.

In the second half of the year, it was set to "leverage a variety of solutions, including insurance telematics, jamming detection and fleet analytics" to boost its top line. It also planned to launch a new camera and navigation solution, with workforce management, and buy out the 49% it does not already own in subsidiary, FleetConnect, which provides asset lifecycle software, and has signed a Ctrack distribution deal in the US.

"After optimising our business in the 2014 financial year and stepping up sales resources and skills over the past six months, we are on track to enter a growth phase," said DigiCore.

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