One left in the race to buy out Metrofile
Document management specialist Metrofile, which recently received two buyout offers, says one of the interested parties has dropped out of the race, leaving a US private equity firm as its sole potential suitor.
Metrofile — which provides services for the storage, retrieval and dissemination of documents, among other things — has been the subject of acquisition interest from local and international investors.
When Covid-19 took hold of the global economy early last year, the group headed by CEO Pfungwa Serima was in the midst of a takeover by US-based Housatonic Partners, which made an offer in the second half of 2019. At R3.30 a share, that would value the deal at about R1.5bn, an 18% premium on the company’s R1.27bn market capitalisation.
In a note to investors on Monday, the company said another potential buyer — which made “an unsolicited approach” in December — has withdrawn from discussions.
For now, it seems, the Housatonic Partners deal is still on the table.
The private equity investment firm has more than $1bn (R15.4bn) in capital under management.
In light of the Covid-19 crisis, Housatonic Partners wanted assurances that Metrofile is trading well in a distressed economy. This process has since been delayed due to travel restrictions on representatives of the potential buyers.
“We expect the consortium [Housatonic Partners] to resume discussions for the potential acquisition of Metrofile once travel restrictions have been lifted,” the group said.
The news comes as Metrofile reported a 4% decrease in revenue to R455m for the six months to December 2020, compared to the previous comparable period’s R473m. The company said the fall in revenue was due to the continued impact of the lockdown measures in the digital services and products and solutions revenue streams.
Its Secure Storage unit contributed 67% to group revenue, up 1% year on year, despite a reduction in handling activities, among other factors. Closing box volumes at the end of the period amounted to R11.1m, remaining flat since June.
Earnings before interest, tax, depreciation and amortisation rose 3% to R155m from R151m previously due to improved operational performance, while the company said operating profit rose 6% mainly as a result of cost-reduction measures.
The group’s net debt was cut by a tenth to R472m for the interim period following improved cash generation.
The group sold its Zambian business in May as part of its planned shedding of noncore operations. The deal was in line with its strategic review to investors in 2019, that it will dispose of noncore, nonscalable and underperforming operations to focus on its core activities and geographies.
Metrofile did not disclose how much the deal was worth.
During the last financial year, the company also exited its operations in Nigeria and Egypt.
The group said it will continue to focus on “maintaining the current level of profitability, supported mainly by predictable annuity revenue and accelerated adoption of our digital offerings”.
The focus on ramping up operations during the reporting period has yielded “positive results”, while “cost reduction initiatives have continued to protect profitability despite the economic challenges”.
Metrofile declared an interim dividend of 7c per share. Its shares were marginally lower after the earnings report to close the day 1.4% weaker at R2.81.