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The disposal by Allied Technologies Limited of an 8.6% equity interest in Liquid Telecommunications Holdings Limited
ALLIED ELECTRONICS CORPORATION LIMITED
Incorporated in the Republic of South Africa
Registration number 1947/024583/06
Share code: ATN
ISIN: ZAE000029658
Share code: ATNP
ISIN: ZAE000029666
(“Altron”)
ANNOUNCEMENT REGARDING THE DISPOSAL BY ALLIED TECHNOLOGIES LIMITED
(“ALTECH”) OF ITS 8.6% EQUITY INTEREST IN LIQUID TELECOMMUNICATIONS HOLDINGS
LIMITED (“LIQUID”)
1. INTRODUCTION
Effective 28 February 2013 Altech concluded an agreement with Liquid, in terms of which Altech
acquired 8.6% of Liquid’s issued share capital in exchange for Altech’s interests in its East African
network assets and the cash subscription of US$16.5 million. At that time, the 8.6% equity stake
was valued at US$50 million (R454 million at an exchange rate of R9.07 to the US$).
Altron shareholders are advised that Altech, an indirectly wholly owned subsidiary of Altron, has
exercised its put option and has entered into an agreement with, inter alia, Econet Wireless
Global Limited (“Econet”) to dispose of its 8.6% equity interest in Liquid for a cash consideration
of US$55 million (the “Disposal”). The Disposal is subject to approval by the Altron board.
Notwithstanding the Disposal by Altech of its 8.6% equity interest in Liquid and the subsequent
termination of the Liquid shareholders’ agreement between, inter alia, Altech and Econet, those
provisions of the shareholders and other agreements which were intended to survive the
termination of the Liquid shareholders’ agreement will remain in full force and effect.
2. NATURE OF THE BUSINESS
Liquid is an independent telecommunications provider for international, voice, internet and data
traffic, supplying fibre, satellite and international carrier services to fixed and mobile
telecommunications operators, internet service providers and enterprises in developing countries.
Liquid operates and owns one of Africa’s most extensive fibre optic networks spanning over
13,000 kilometres, which provides services to customers in Kenya, Uganda, Rwanda, Zambia,
Zimbabwe, Botswana, Democratic Republic of Congo, Lesotho and South Africa.
3. RATIONALE FOR THE DISPOSAL
- Following the delisting of Altech and the creation of the Altron Telecommunications, Multi-
media and Information Technology division (Altron tmt), both the Altron and Altech boards no
longer consider Altech’s 8.6% equity interest in Liquid to be core to the ongoing operations of
the Altron group;
- The cash consideration from the Disposal will be used to reduce the Altron group’s net debt
position following the scheme of arrangement between Altron and Altech, completed on 19th
August 2013; and
- Notwithstanding the Disposal, the Altron group will continue to explore areas of common
commercial interest and co-operation with the Econet/Liquid group in Africa.
4. CONSIDERATION
The Disposal consideration is a cash consideration of US$55 million (R588 million at an exchange
rate of R10.69 to the US$) payable by Econet to Altech on 28 February 2014, subject to Altron
board approval. This consideration will give rise to a profit on disposal of R134 million before tax,
which will be treated as a capital item and will fall outside of headline earnings.
5. CONDITION PRECEDENT TO THE DISPOSAL
The Disposal is subject to approval by the Altron board by 21 January 2014 (or such later date as
may be agreed by the parties in writing).
6. FINANCIAL EFFECTS
The unaudited pro forma financial effects, set out below, have been prepared for illustrative
purposes only in order to assist Altron shareholders in assessing the impact of the Disposal on
the basic earnings per share (“EPS”), diluted basic EPS, headline earnings per share (“HEPS”),
diluted headline earnings per share (“DHEPS”), net asset value per share (“NAVPS”) and net
tangible asset value per share (“NTAVPS”). The unaudited pro forma financial effects have been
prepared for a 6 month period and are based on Altron’s unaudited consolidated interim results
for six months ended 31 August 2013.
The unaudited pro forma financial effects have been prepared in accordance with the Listings
Requirements, the Guide on Pro Forma Financial information issued by the South African Institute
of Chartered Accountants and the measurement and recognition requirements of International
Financial Reporting Standards (“IFRS”). The accounting policies used to prepare the unaudited
pro forma financial effects are consistent with those applied in the preparation of the financial
statements for the period ended 31 August 2013.
The unaudited pro forma financial effects have been prepared for illustrative purposes only, in
order to provide information on how the Disposal may have affected the financial results of Altron
and how they may have impacted on Altron shareholders. As the financial effects are unaudited
and pro forma in nature, they may not give a true reflection of the actual financial effects of the
Disposal. The unaudited pro forma financial effects are the responsibility of the directors of Altron.
Before the After the
Disposal Disposal % Change
(Note 1) (Note 2)
Basic EPS from total operations (cents) 82 119 45
Diluted basic EPS from total operations (cents) 81 118 46
HEPS (cents) 82 85 4
DHEPS (cents) 81 84 4
NAVPS (cents) 1,131 1,154 2
NTAVPS (cents) 608 631 4
Notes to the unaudited pro forma financial effects:
1. The financial information in the "Before the Disposal" column has been prepared based on
Altron’s unaudited consolidated interim results for the six months ended 31 August 2013.
2. The financial information included in the “After the Disposal” column has been prepared
based on Altron’s unaudited consolidated interim results for the six months ended 31 August
2013, taking into account the following:
2.1 The Disposal is assumed to be effective 1 March 2013 for statement of comprehensive
income purposes;
2.2 100% of the profit arising on the Disposal is attributable to Altron shareholders;
2.3 The Disposal is assumed to be effective 31 August 2013 for statement of financial
position purposes;
2.4 The cash consideration of US$55 million has been translated into rands at an exchange
rate of R10.69 to the US$ resulting in a cash consideration of R588 million;
2.5 The cash consideration of R588 million is assumed to have been utilised to repay
borrowings with an interest rate of 7.0%;
2.6 Altech's 8.6% equity interest in Liquid is classified as a non-current available-for-sale
financial asset in accordance with IAS 39 - Financial Instruments: Recognition and
Measurement. On de-recognition of the financial asset, the cumulative gain that was
recognised in other comprehensive income of R134 million (pre-tax) is recognised in
profit for the period;
2.7 An effective capital gains tax rate of 18.7% has been applied to determine the tax
effects of the Disposal;
2.8 The costs relating to the Disposal, which are once-off in nature and immaterial, have
not been included in the calculation;
2.9 The weighted average number of shares of 318 million, diluted weighted average
number of shares of 322 million and number of shares in issue of 324 million have been
used in the calculations above, and have not changed as a result of the Disposal; and
2.10 There are no post-balance sheet events which require adjustment of the pro forma
financial effects.
7. CATEGORISATION OF THE DISPOSAL
The Disposal has been categorised as a category 2 transaction in terms of section 9.5(a) of the
JSE Listings Requirements.
Johannesburg
10 January 2014
Investment Bank and Sponsor
Investec Bank Limited
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