Rand drives Metair to drop rare opportunity to acquire TAB
Metair, the listed manufacturer, distributor and retailer of energy storage solutions and automotive components, has walked away from a once-in-a-lifetime opportunity to acquire Tovarna Akumulatorskih Baterij (TAB), a value accretive asset, because of the depreciating rand.
Metair on Thursday said it would no longer proceed with the planned acquisition of the Slovenian car battery maker, saying the rand price of the asset has soared because of volatility in emerging-market currencies.
As a result of the move, the energy storage and automotive component manufacturer has given up on what CEO Theo Loock in June described as a value-enhancing transaction.
Loock said another company is likely to acquire TAB soon.
"I do not think it is going to be available for a long time. Such opportunities come once in a lifetime," he said.
Metair in June announced its plans to acquire TAB for €300m. TAB has after-market automotive battery manufacturing facilities in Slovenia and Macedonia, an automotive after-market battery distribution network throughout Europe, as well as a global industrial battery business and an energy storage business — an area with enormous growth opportunities.
Loock was uncomfortable with the increase in the asset’s rand price. "We have a rand figure for the asset, which we have not disclosed to the market."
When the company announced the deal in early June, the €300m was R4.43bn. "The rand price of the asset is beyond the level we are comfortable with," he said. At Thursday afternoon’s rand/euro exchange rate of R16.61, TAB was worth almost R5bn.
In June, Metair entered into exclusive discussions with TAB. During the period of exclusivity, Metair went through TAB’s past financial statements. The exclusivity period would have ended on October 1.
In the six months ended June 30, Metair revenue increased 10% to R4.5bn and operating profit was up 16% to R413m. Operating margin improved from 8.7% to 9.2%. Group earnings before interest, tax, depreciation and amortisation increased 11% to R585.7m.
Headline earnings per share were up 16% to 132c.
The Energy Storage Vertical business lifted revenue by 8% to R2.6bn, while its operating profit was up 10% to R250m.
Loock said the company was pleased with the performance of Mutlu Akü, its Turkish battery business, which increased its automotive battery exports by 28% and local industrial battery sales by 83%.
Metair’s Automotive Components Vertical business lifted revenue by 12.5% to R2.2bn, while profit before interest and tax was up 31% to R261m.
Loock said that as a result of the recent and ongoing volatility in emerging-market currencies, especially in Turkey, the board has prioritised the continued focus on maintaining Mutlu’s good performance, hence the decision to terminate TAB’s due diligence process and negotiations. "Management is focused intently on ensuring that Mutlu’s operational performance is sustained during the second half and that measures are taken to mitigate the impact of currency volatility," he said.
Metair’s share price jumped 13.38% to close at R15.93.