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Buyout offer boosts DigiCore

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 22 Jun 2015
DigiCore CEO Nick Vlok has agreed to vote his 16% stake in the company in favour of a R1 billion buyout offer.
DigiCore CEO Nick Vlok has agreed to vote his 16% stake in the company in favour of a R1 billion buyout offer.

Novatel's offer to buy out DigiCore for R1 billion - or R4.40 a share - saw the JSE-listed company's stock shoot up 13.89% on Friday, to close at R4.10.

The offer, which was initially announced earlier this month and firmed up on Friday, is a 67.9% premium on DigiCore's average 30-day volume weighted traded price of R2.62 per share. So far, DigiCore has received irrevocable undertakings from shareholders owning 58% of its stock, including CEO Nick Vlok, to support the offer.

Novatel designs and develops machine-to-machine wireless solutions based on 3G and 4G technologies. The Nasdaq-listed company also delivers Internet of things and cloud software-as-a-solution services to carriers, distributors, retailers, original equipment manufacturers and vertical markets worldwide.

The US company's product lines include MiFi mobile hotspots, USB modems, mobile tracking solutions and asset tracking solutions.

Adding value

Novatel's acquisition of DigiCore, which develops and provides telematics tools, will establish the US company as a "significant player in the global asset tracking and management market" and will add "meaningfully" to earnings next year.

DigiCore 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.

In a statement, DigiCore explains the takeover will allow shareholders to exit for a "significant" premium. The deal is subject to conditions and DigiCore has established an independent board to evaluate whether the bid is fair to shareholders.

Salient dates will be posted to shareholders, who will then vote on the bid before DigiCore takes the next steps towards delisting.

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