A formal buyout offer could be tabled for technology conglomerate Alviva within three or four weeks, but shareholders at Friday’s AGM were still keen to know if any other potential offers are possible.
Alviva is subject to an expression of interest from its two large empowerment shareholders, THAM Investments and DY Investments, that have pencilled in a R25 a share offer to minority shareholders.
Some Alviva shareholders have been clamouring for a higher buyout offer, a call that became louder after the group recently reported earnings of 545c a share for the year to end-June. That means the proposed buyout is being pitched on an undemanding historic earnings multiple of four-and-a-half times.
The end-June financials showed revenue and Ebitda targets for financial 2022 of R20bn and R1bn respectively were easily exceeded with top line up 57% to R23bn and the profit line up 62% to R1.4bn. Cash generated was R647m — equivalent to a reassuring 530c a share.
But the outlook for the financial year ahead is cloudy. Alviva noted a decrease in demand for personal computing products felt since March — indicating that this, with an economy constrained by energy costs and rising interest rates, will make it difficult to maintain earnings at the 2022 level.
Still, many market watchers believe THAM and DY will secure a bargain at the R25 a share offer, and hopes remain that the indicative buyout price could be raised to closer to R30 a share. To date, there have been no official indications of any revised offer.
At the AGM, executives explained that after the expression of interest was pitched the group engaged the services of a corporate advisory firm to see if there was any interest from other buyers. There was no support for another offer.
Worked hard
Alviva CEO Pierre Spies said there was previously interest from two large corporations in Alviva that proceeded to the due diligence stage. “Both walked away at the death ... concerned about the variability in the group’s working capital.”
Spies said the board has worked hard to secure value for shareholders. He pointed out that the initial buyout offer from the two empowerment shareholders was pitched at R22 a share — when Alviva’s share price was R22. “The offer was updated to R25 a share, a 66% premium to the [then] market value. We thought it was a good offer, but now some shareholders consider it too low.”
FD Richard Lyon conceded the current valuation of Alviva is still attractive to share repurchases to enhance value for existing shareholders.
He said that the R185m acquisition of specialist technology business Tarsus last year also exceeded expectations. “This board does not rest on its laurels just because there is an expression of interest (from THAM and DY). We’ve been out in the market looking for potential partners to do deals to enhance shareholder value. We have been trying for four-and-a-half years….”
Alviva closed up almost 1.5% at R23.49 on Friday.
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