Mergers, Acquisitions and Financial Results

Shareholders in SetPoint Technology seem eager for a shake-up within the industrial hi-tech group, with its shares surging 28% on news that it may no longer survive as a stand-alone entity.

Brisk trading last week saw its shares gain 16c to shoot from 54c to 69c after expressions of interest from various parties to acquire some of its divisions, or to acquire all or at least a material percentage of its shares. CEO Errol Gregor said approaches from two different parties were being assessed, but the board was not yet in a position to make any recommendation to shareholders. He would not give any details of who had made the partial or wholesale takeover offers, but said the company had a duty to take them seriously.

SetPoint's major investors are Sabvest with 18%, the Haroon Habib Family Trust with 17% and Zirconia with 15%. Although the bids were at a premium to SetPoint's trading price, the swift price rise yesterday will have partly annulled those premiums.

SetPoint's organogram shows 16 divisions. It runs Africa's largest analytical services for the oil industry, offers precious metals exploration analysis and equipment for moving minerals underground.

SetPoint lost R13,6m on revenue of R315m for the year to August after accounting irregularities within one of the companies it had acquired. The revenue and profits within that division, Seran Engineering and Supplies, were overstated to cover up an operating loss of R19m. SetPoint had to impair Seran's intangible assets by R14m, and eliminated the final dividend that shareholders had come to expect.

When SetPoint reported those results, it said Seran would continue to supply "first-class products and services" to the mining industry, although its project division would be axed and its manufacturing and services divisions streamlined.

Analyst Warwick Lucas of Imara SP Reid said SetPoint's takeover of Seran had confirmed that the company was not good at acquisitions, particularly since some earlier acquisitions had also needed cleaning up.

Gregor said the problems at Seran were a "hiccup" that had been resolved. The company was back on track. Gregor also said the instant rise in its share price had nudged SetPoint closer to the 80c mark where it had traded before its year-end figures triggered a decline.

Business Day

CORRECTION: ISSUE 336 – Vivendi goes into Sub-Saharan Africa with Onatel purchase

In the e-letter (but not on our website) we made a mistake in the subscription price comparisons. US$58 should have course of read US$580 and US$72.50 should have read $725. It should have been obvious from the context but apologies. More haste, less speed…