Metrofile’s takeover by US firm pushed to end of May
The takeover of JSE-listed documents storage company Metrofile, by a US private equity firm, has been delayed due to uncertainty caused by Covid-19.
On Monday, Metrofile said the uncertainty arising from the Covid-19 pandemic, as well as the ongoing lockdown in SA, had resulted in the Housatonic Consortium not being in a position to finalise its arrangements with potential funding and BEE partners by March 31, as originally intended. Accordingly, both parties have agreed to extend the date by which the Housatonic Consortium needs to finalise the deal to May 31.
Metrofile said in the second half of 2019 that US-based Housatonic Consortium had made an offer to acquire 100% of the group for R3.30 a share.
Housatonic Partners is a private equity investment firm with more than $1bn in capital under its management, investing globally from its offices in San Francisco and Boston.
It targets growing, profitable companies in the recurring business services, technology and health-care sectors.
Anthony Clark, an independent analyst at SmallTalkDaily Research, still believes the deal will be concluded, though the lockdown’s resultant disruption to daily business will extend the timeline.
“I had expected settlement and payment by Housatonic Partners in late July or August. Given the new board meeting date of May 31 … one can assume that the payment date will also be pushed out.”
He also highlighted that the valuation in US dollars of the original offer in early December 2019 for Housatonic Partners “has materially moved in their favour due to the devaluation of the rand”. Since December 9 2019, the rand has weakened by 21.3%, making the deal value now $82.3m rather than the original $99.8m.
Clark said Metrofile’s annuity income business model made it more resilient in the lockdown than many other small- to midcap companies. Invoices for boxes in storage will continue to be billed, regardless of the lockdown. That service remains a significant contributor to the company’s revenues and profit, so the 21-day lockdown will pass with that part of Metrofile’s business largely unaffected, he said.
The business is also “far more stable and predictable. When business recovery starts, their restart will be far less volatile than many manufacturing businesses”, said Clark. He also said while many other companies are cutting or postponing their dividend, Metrofile is paying its 6c per share interim dividend, “again, a signal of its inherent stability”.
Earlier in March, Metrofile said the strategic review and restructuring of its operations were beginning to bear fruit, with the company reporting a 12% increase in interim operating profit.
For the first half of the 2020 financial year, the company said revenue from continuing operations increased 8% to R473m, while earnings before interest, tax, depreciation and amortisation from continuing operations increased 27% to R151m as a result of improved operational performance as well as the adoption of new accounting standards for leases.
Headline earnings per share were up 26% to 12.9c from 10.2c in the previous comparative period, while earnings per share rose 19% to 12.1c.
Shares in Metrofile closed marginally higher on Monday at R2.55, a 0.4% increase, after rising as much as 12% in afternoon trade.