AEL: ALLIED ELECTRONICS CORPORATION LIMITED - Detailed cautionary announcement
Detailed cautionary announcement
Allied Electronics Corporation Limited
Incorporated in the Republic of South Africa
Registration Number: 1947/024583/06
Share Code: AEL
("Altron" or the "Company")
DETAILED CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement released on the Stock Exchange News
Service ("SENS") earlier today and are now advised that, in line with Dr Bill Venter´s and Altron´s
previously stated intention to move from a family controlled and managed business to independent
management, and to continue to build a focused IT business, the Company intends to:
- collapse the control structure;
- introduce a new strategic partner who will invest R400 million; and
- reconstitute Altron´s board of directors.
Accordingly the Company and Value Capital Partners ("VCP") have reached an in-principle agreement
in terms of which VCP will subscribe for shares in the Company and Altron´s current control structure
will be unwound ("the Proposed Transaction"). It is expected that the Proposed Transaction will be
implemented as follows:
- VCP will inject R400 million of capital into the Company, through a cash subscription for
shares. This will accelerate Altron´s growth initiatives in its core IT operations and furthermore
align the interests of VCP with those of other Altron shareholders.
- The subscription for Altron shares represents an issue of shares for cash by the Company and
will be effected at an issue price equal to the 30-day VWAP calculated up to 25th November
2016, which equates to R6.84 and R7.35 per share before and after conversion of the existing
N shares, respectively, as referred to below, such that, on successful completion of the
Proposed Transaction, VCP will hold a c.15% interest in the Company ("the VCP
- The principals and co-founders of VCP are Antony Ball and Sam Sithole, previously CEO and
CFO respectively of Brait. They will join Altron´s board of directors as non-executive directors
on completion of the Proposed Transaction.
- VCP is an investment firm that deploys the best of private equity principles in the listed equity
space. Its philosophy is to invest in businesses with an attractive business model trading
significantly below intrinsic value and which lend themselves to material value unlock. VCP
intends to be an engaged shareholder to assist with the implementation of strategies to
maximise returns for all of Altron´s shareholders.
- If the Proposed Transaction is successfully implemented, it will result in the collapse of Altron´s
current control structure into a single class of no par-value, voting shares. Post
implementation, current low voting N-shares will become fully voting shares on a ratio of 90
voting shares for every 100 N-shares.
- Dr Venter, the current Chairman and founder of the Altron Group some 50 years ago, has
decided he will retire as Chairman at the end of Altron´s current financial year. Dr Venter will
assume the title of Chairman Emeritus and will remain as a non-executive director of the
Company. The board of directors will appoint a new independent Chairman from within its
ranks. The board of directors will also continue the process of recruiting a Group Chief
Executive as replacement for Robert Venter, who early in 2016 indicated his intention to step
down as Chief Executive in due course. Robert Venter will become a non-executive director of
the Company upon such appointment. The board of directors is also considering the
appointment of a leading IT expert to the board.
- Dr Venter and the Venter family (through various Venter controlled entities, including Biltron
Proprietary Limited) currently hold 17.8% of the economic rights, including treasury shares
(19.4% excluding treasury shares), and exercises 57% of the voting rights in the
Company. Whilst Dr Venter and the Venter family will, in terms of the Proposed Transaction,
remain invested in and committed to the Company and will thus retain their economic
interest, their voting rights will be diluted. As such, the Company has reached an in-principle
agreement with Dr Venter and the Venter family in terms whereof it is anticipated that,
subject to regulatory approval, a mechanism will be implemented so as to afford Dr Venter
and the Venter family 25.1% of the voting rights in the Company, post the implementation of
the Proposed Transaction, provided that they continue to hold at least 10% of the ordinary
shares in the Company. As a result of the aforesaid, and on successful completion of the
Proposed Transaction, Dr Venter and the Venter family would cease to hold outright control
over Altron and would therefore dilute from 57% to 25.1% of the total voting rights.
Altron and VCP have procured in-principle support from the Company´s shareholders representing c.
82% of the A shares and 76% of the N shares (which approximates 83% of the voting rights in the
Company) to support the Proposed Transaction. This includes Dr Venter, who is fully supportive of the
Shareholders are cautioned that the implementation of the Proposed Transaction remains subject to,
inter alia, regulatory approval. There is currently no certainty that the required regulatory and other
approvals required for the Proposed Transaction will be obtained. Shareholders are therefore advised
to exercise caution in dealing with the Company´s securities until a further announcement is made.
6 December 2016
Joint Advisors to Allied Electronics Corporation Limited
INVESTEC BANK LIMITED
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
INVESTEC BANK LIMITED
Date: 06/12/2016 04:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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