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ALLIED ELECTRONICS CORPORATION LIMITED - Potential unbundling and separate listing of Altrons UK subsidiary, Bytes Technology Group Limited and cautionary

Release Date: 02/04/2020 08:00
Code(s): AEL     PDF:  
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(Incorporated in the Republic of South Africa)
(Registration number 1947/024583/06)
Share code: AEL        ISIN: ZAE000191342
("Altron" or "the Company" or "the Group")

Potential unbundling and separate listing of Altron?s United Kingdom ("UK") subsidiary, Bytes Technology Group Limited ("Bytes UK") and cautionary announcement 1 Overview and rationale
Shareholders are advised that Altron has recently completed its FY21 annual strategy review. A fundamental and strategic goal of the board of directors of Altron ("the Board") has been, over time, to maximise value for shareholders. This resulted in driving a One Altron strategy, which successfully delivered the disposal of non-core assets, the rationalisation of operations and the execution of targeted acquisitions in high-growth areas. This positioned Altron as a leading IT Services organisation in Africa and achieved a total shareholder return of 26% per annum over three years with the return on capital employed increasing from 6.3% to 20.8% over the same period.
As part of its strategic review, the Board assessed each of the business units within Altron, to identify opportunities which have the potential to unlock further value for shareholders and to streamline operations. The Board concluded that the true value of Bytes UK, a wholly-owned subsidiary of Altron, is not reflected in the Company?s share price. This business has increasingly developed a growth trajectory and strategic levers that are different to the rest of the Group and operates in a different geographical capital market with a highly rated peer group. Consequently, the Board has resolved to pursue:
- a potential listing and potential share offering of Bytes UK on the London Stock Exchange; - a secondary listing of Bytes UK on the Johannesburg Stock Exchange ("JSE"); and - an unbundling of the remaining Altron shareholding in Bytes UK, post the potential share offering to Altron shareholders (collectively referred to as "the Potential Transaction").
The primary listing of Altron on the Main Board of the JSE will be retained.
Whilst the Board is cognisant of the current state of capital markets and the impact of market conditions on the success of the Potential Transaction, the Board has deemed it appropriate to commence with the necessary preparation for the Potential Transaction. This preparation is likely to take between 9 to 12 months to complete. Altron will reassess market conditions post completion of the required preparatory work and, if financial market conditions have not improved, the Board will determine the appropriate way forward for the Potential Transaction. The governance and leadership elements related to the Potential Transaction will commence forthwith, and these will include:
- constituting an independent board of directors for Bytes UK;
- the separation of Bytes UK from all Group functions;
- concluding arrangements with the Bytes UK management team, consistent with an independent company; and
- separating all Bytes UK operational functions to ensure a standalone operational business.
Altron has appointed Rand Merchant Bank, a division of FirstRand Bank Limited, as Financial Advisor and Transaction Sponsor in respect of the Potential Transaction in South Africa, and is in the process of appointing an advisor in the UK to advise Bytes UK on the potential listing and potential share offering. 2 Overview of Bytes UK
Bytes UK is a subsidiary of Altron within the Digital Transformation segment of the Group.
Bytes Technology Group was established in the UK in 1982. The business is focused on Software Licensing, Software Asset Management, Security Solutions, Cyber Consulting Services and Public Cloud Migration and Management. The Bytes UK group has over 7500 customers, predominantly in the large to medium enterprise spac
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