DigiCore shares rev up on buyout offer report

SHARES in vehicle tracking group DigiCore surged 29.43% to close at R3.43 on Friday after it announced it had received a buyout offer from Nasdaq-listed Novatel Wireless.

The spike in the share price has lifted DigiCore’s market capitalisation to R853m.

DigiCore’s operations span six continents, with more than 1,000 employees and more than 825,000 systems sold. DigiCore owns the Ctrack brand.

Novatel has proposed to pay R4 per DigiCore share, apremium on its closing price.

According to DigiCore, a due diligence had already been conducted by Novatel and no material issues had been identified.

However, DigiCore said even though negotiations were at an advanced stage, no final binding agreement had been concluded with Novatel.

The company also said there was “no certainty” that the negotiations with Novatel or a final binding agreement would be “successfully concluded”.

Novatel is a technology firm whose portfolio includes software tracking management solutions.

Irnest Kaplan, MD of Kaplan Equity Analysts, said it would be “interesting to see what Novatel wants to do with DigiCore over the longer term”.

Representatives for DigiCore were not available for comment.

DigiCore competes with other listed companies such as MiX Telematics, which is also listed in the US, Cartrack and Atronowned Altech Netstar.

Cartrack, which listed on the JSE in January, operates in 18 countries across Africa, Asia and Europe, and at the time of the listing had 400,000 clients.

MiX has 512,00 customers in 112 countries throughout Africa, Asia, Europe, the Middle East, and North and South America as well as Australia.

Mr Kaplan said the car tracking market “can be very lucrative” for experienced players and on a large-scale level. However, it carries a lot of challenges.

The car-tracking industry consists of fleet management for corporate clients and stolen vehicle recovery, which is mainly for individuals. Mr Kaplan said the stolen-vehicle recovery business was competitive but challenging when it came to the management of bad debt.

In February, DigiCore reported that a 5.3% increase in revenue for the six months to December rose to R450.7m, mainly due to growth in the stolen-vehicle recovery unit and insurance markets.