The AST share price gave up Friday`s gains this morning. The share rose 33% on Friday in the wake of an announcement that arivia.kom had proposed acquiring the AST Group.
AST announced on Friday afternoon that it had received a proposal from arivia.kom in terms of which the state-owned technology firm proposes to make an offer to AST shareholders to acquire their shares.
"The proposal does not constitute a firm intention to make an offer, nor is it certain that an offer will be made," AST says in a cautionary announcement. However, it says the preliminary value placed on the deal by arivia.kom is substantially higher than the current market capitalisation.
The AST share, already buoyed by recent market rumours, rose 5c or 33% on Friday to close at 20c. However, by midmorning today the share price was back at 15c.
An analyst says the timing of the proposed deal is strange, coming as AST is preparing to launch a rights offer. He says there are also several potential hurdles.
"Integrating two companies is not easy as it is, and in this case arivia is smaller than AST, so immediately you have a potential problem there. And not only is it wanting to buy a bigger company, it wants to buy a company that has its own problems."
Arivia.kom achieved revenue of R1.52 billion in the year to 31 March, and it had cash of R118.23 million. For the year to June, AST`s revenue was R2.21 billion. Its market capitalisation at 15c is R100.97 million.
The analyst says he hopes arivia performs a proper due diligence investigation, but in his opinion, it is difficult to make much sense of AST in the midst of its restructuring exercise.
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