Datatec's London Listing Falls Short

Mergers, Acquisitions and Financial Results

Technology group Datatec has raised less than half the cash it hoped to generate through a secondary listing in London, with institutional investors pumping in only £13,9m of the targeted £29m.

Just 7,2-million of the 16,3-million new shares made available were taken up ahead of yesterday's listing on London's Alternative Investment Market (AIM), despite carrying a 10% discount to their price on the JSE. Several potential acquisitions are under negotiation, and the London loot was earmarked for funding those deals.

Datatec’s CEO wins the “optimist of the year award” after claiming that he was not in the least disappointed as the listing was about raising Datatec's profile as much as raising cash. "We are absolutely happy with what we raised," he said. In any company listing, not raising the sum announced is regarded as a failure.

The take-up was lower than expected because Datatec's share rose from R24 to R30 just before the listing. That meant the price potential buyers had expected to pay rose quite substantially in a matter of days, he said.

The new shares were issued at 192p each, or R26,64, and with 154,4-million in issue Datatec reached a market capitalisation of R4,6bn, or £332m. Its shares lost R1 to trade at R29 on the JSE yesterday.

Montanana said the final result was a compromise between the wishes of existing shareholders and those of new institutional investors. "South African shareholders wanted us to sell as little as possible to avoid dilution," he said.

"Originally we asked for approval to list 15%, but our South African shareholders said that was too much. They knocked it back to 10%, and wouldn't let us give more than 10% discount on the price."

Although less than 5% of its shares were released in the new floatation, Datatec has won approval from the Reserve Bank and both exchanges for all its shares to trade freely between the two. That will enable it to raise as much as it needs from foreign investors without any bottlenecks caused by having too few shares available to trade internationally.

"All the shares in Johannesburg are available in London and vice versa. If a shareholder finds it hasn't got enough shares in London it can buy from the JSE and trade them in London. That's why we weren't so bothered about how much we raised," Montanana said.

Datatec already held more than $70m in cash before the listing, and now holds close to $100m. "We have a road map of $70m to $90m in acquisitions in the pipeline over the next six months," Montanana said.

Potential acquisitions now being discussed include moves to strengthen its network security offerings and to grow its presence in the UK. Further moves next year would grow the group's international footprint. "We are underweight in developing markets. We obviously want to be careful and selective and we are looking to do something in Turkey," Montanana said.

Business Day