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Disarming deals

TWO Cape Town-based investment companies divested from their defence-related interests late last year.

Stellar Capital Partners – which once was touted as a vehicle to carry retail tycoon Christo Wiese’s smaller strategic investments – has sold its two business units housed in Retreat-based technology business Tellumat.

According to an official statement, Stellar – which owns 49% of Tellumat – confirmed the sale of the technology group’s Air Traffic Management and Defence & Security business units to Hensoldt South Africa.

Pretoria-based Hensoldt has a strong presence in SA, and designs, manufactures and sells a variety of highly technical solutions for defence and security applications internationally.

Stellar explained that Hensoldt South Africa and Tellumat had business areas that complemented each other – including sensors and communications (particularly for unmanned aerial vehicles and other airborne intelligence, surveillance and reconnaissance applications).

What Stellar did not reveal was the transaction value.

The record will show Tellumat was originally acquired for around R280 million. Later a 51% stake in Telumat was sold to Amalinde Technologies for an attractive price of R180 million. But by the end of June 2020 Stellar’s share of Tellumat’s value – based on the estimated recoverability the sale of remaining operations was just R8.9 million.

In another ‘disarming’ African Empowerment Equity Investments (AEEI) – which owns Premier Fishing & Brands and Ayo Technologies – retreated from its strategic investment in SAAB Grintek Defence (SGD).

In 2015 AEEI acquired a 25% (plus 1 share) stake in SGD. SGD was considered one of AEEI’s prime ‘strategic investments’- alongside its stake in British Telecoms SA.

Although it seems AEEI had plans to reinforce its shareholding in SGD, a call option was triggered by SAAB after the lapsing of the 60 month investment agreement.

Essentially this meant SAAB (re)acquired AEEI’s 25% (plus one share) stake SGD for R150 million.

While AEEI appears to have made a decent turn on the investment and would welcome the additional cash in its coffers, there might be some regret in relinquishing an investment in a specialist business that was renowned for strong export earnings.

SGD operates mainly as a South African defence and security company. Its expertise lies in electronic warfare systems, sensor, technology, command and control, training systems, avionics, security and support solutions to the African and international markets.

The sales price, though, seems decent considering that the loss the loss before tax attributable to the SGD net assets was over R17 million for the year to end August 2020.

Interestingly, both defence disposals by AEEI and Stellar follow a similar move by Stellenbosch-based investment company PSG Group – which sold its 25% stake in antenna specialist Alaris Holdings in December 2019.

Alaris specialises in global radio frequency technology with a focus on defence and specialised antennas for mainly international customers.

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