IT’S BEEN a busy week for retail tycoon Christo Wiese — first he took a play for diamond mining venture Trans Hex Group and then took a tilt, through the recently formed Stellar Capital Partners (SCP), at a security technology niche.
On Thursday, SCP — which has Wiese as a shareholder of reference — tabled a bid for JSE-listed security technology specialist Amalgamated Electronic Corporation (Amecor) in a R267m deal.
Amecor is a security network technology provider through two subsidiaries, Sabre Radio Networks and FSK Electronics SA. Sabre ranks as the largest security network provider in Southern Africa, while FSK manufactures data networking equipment for use mainly in the security industry.
SCP will offer Amecor shareholders a cash settlement of 380c per share or two new SCP shares for each Amecor share held. Amecor shareholders can also opt for a combination of cash and SCP shares.
SCP has already received irrevocable undertakings from Amecor shareholders holding about 65% of the company’s issued shares. These include alternative asset management company Westbrooke Capital Management (which speaks for 22.5% of Amecor), media magnate William Kirsh (13%), Integrated Capital Investments (12.1%) as well as former director Dereck Alexander (11.4%) and CEO Keith Viera (6.1%).
SCP CEO Charles Pettit said Amecor offered strong annuity income flows as well as an opportunity to grow the company rapidly.
He suggested that parts of Amecor’s manufacturing operations could be consolidated with SCP’s investment in electronics manufacturer Tellumat. “We can look at getting more throughputs from a smaller cost base.”
Westbrooke Capital Management CEO Jarred Winer said it was a good time to exit Amecor.
“We got in at 200c a share, when the company was a hodgepodge of assets. We are exiting at an attractive return,” Winer said.
This is the second deal in which Westbrooke has engaged with Pettit, having played a role in the sale of automotive components group Control Instruments to SCP subsidiary Torre Industries in 2014.
But Winer believed there was still considerable upside in Amecor for SCP. “The company has good margins, good cash flows and good management. But the company currently does not have the scale to warrant a listing.
“It should become acquisitive under SCP, and there is already a deal pipeline….”
In the financial year to end-March, Amecor posted a 17% increase in revenue to R131m with headline earnings up more than 300% to 40.4c a share.
The company’s earnings before interest, depreciation, taxes and amortisation was close to 40% and a reassuring cash-conversion ratio of 90% underpinned a 93% hike in dividends to 28c a share.
SCP’s share price weakened on news of the Amecor deal. Vunani Securities small-to mid-cap analyst Anthony Clark said acquisitive SCP had a lot of deals to bed down. “The real test will be the impending interim results from SCP and (main investment) Torre.