Altron's Powertech Buys IST For R505m
Altron subsidiary Powertech has upped the ante in its bid to secure a bigger slice of the lucrative power-generation market, announcing on Friday that it had acquired IST for R505m.
IST, which was taken private in a management and private eq-uity buyout by Ethos Private Equity in 2004, offers engineering solutions in the power utilities, telecommunications and mining sectors.
The deal was expected to enhance earnings for both Altron and Powertech, Altron said.
Powertech, which supplies power infrastructure products, has already benefited handsomely from the government’s infrastructure roll-out.
In the financial year to February the company achieved its best results to date, raising revenue 43% to R6,3bn and increasing operating profit 128% to R638m, while headline earnings rose an unprecedented 144% to R415m. Over the past 14 months, Powertech has more than doubled its order book to R2,1bn.
By bringing IST into the fold, the group will gain further significant exposure to the fast- growing market. More pertinently, IST also brings with it a solid skills base.
Most of IST’s 300-strong workforce are engineers, and one analyst said they would be valuable to the broader group.
Powertech CE Norbert Claussen said the acquisition of IST would enable Powertech to offer a complete package in its chosen markets. The company is planning to further increase its exposure through organic growth and further strategic acquisitions.
Over the past three years Powertech has spent R369m on optimising and expanding its capacity and it has a further R655m earmarked for this, the bulk of which (R350m) will be deployed at Aberdare Cables. A sizeable R170m will also be spent to expand its batteries division.
It is keen to make further acquisitions, Claussen said. “We have focused quite a lot on our internal capacities. This is our first acquisition since 2000 and we will certainly look at acquisitive opportunities going forward, although there is nothing firm at the moment,” he said.
The IST acquisition excludes its defence and nuclear operations which, Claussen said, required specialist expertise to optimise the business that Powertech did not have .
The deal will be funded through a combination of equity raised at the holding company level and internal funds, Claussen said.