Metair may start splitting up by the end of this year
The owner of First National Battery says spinning off the energy business would release shareholder value
Metair could commence splitting itself into two in the fourth quarter, separating its European-based acid battery business from its faster-growing SA automotive components maker, MD Theo Loock said on Wednesday.
Splitting the two businesses will allow Metair’s shareholders to attach value to the energy business, whose major asset is Turkey-based lead acid battery maker Mutlu Akü. The automotive components business is locally based, focused on SA vehicle manufacturers.
“The managed separation opportunity can put a value proposition for the energy vertical on the table that the shareholders can associate with. Our energy [business] is an international business, with international exposure and international trends,” Loock said.
“We find that some of our shareholders find it difficult to value the overseas business. Our biggest overseas battery business is in Turkey. They find it difficult to understand Turkey. What is the country risk in Turkey? Is there an exchange risk? That gives rise to noise to our SA-based operation. The managed separation will locate the noise in the energy business with a shareholder that understands that noise,” Loock said.
The company, which includes battery manufacturer First National Battery in SA, announced intentions in 2019 to split into two at the same time. The company also announced in December 2019 that it had received unsolicited offers for the energy business and in particular Mutlu Akü.
“We are excited about the opportunities available for both businesses and the board believes that a managed separation of the two verticals could unlock significant value and should be investigated,” Loock said.
He said the company was gathering information about the possible separation of the two units. That would be followed by valuation of the energy business in the third quarter of this year. Depending on the valuation, Metair would commence with the implementation of the split in the fourth quarter, he said.
In the year ended December 31 2019, Metair reported a 2.7% increase to 336c in headline earnings per share, a widely watched measure of company performance that strips out certain one-off items of revenue. Revenue was up 9.4% at R11.2bn.
Turnover of Metair’s automotive component business increased 11.3% to R5.6bn while the energy business delivered 7.4% growth in sales to R6.9bn.
Loock said its auto business could add 3,200 employees after securing supply deals for the full spectrum of wire harnesses to a range of new customers in the auto industry, which recently reached a three-year wage agreement. The deal would need about R500m investment and deliver turnover of between R12bn and R14bn over seven years.
He said automotive industrial policy clarity has built confidence, leading to increases in investment in SA.
“Metair is already a beneficiary of much of that investment, and we are well placed to continue supporting African exports and localisation requirements which will underpin our growth in coming years,” Loock said.
He was referring to the Automotive Production and Development Programme, a government production incentive scheme for the motor industry, which was introduced in January 2013.