FAMILY MOVES ON
But the Venters will remain very influential Altron shareholders, with a strong interest in the tech group’s strategic direction
Baton is passed at Altron
In May 2001, Allied Electronics Corp (Altron) was hosting a results presentation for media and analysts at its Parktown offices. The group and the Venters, the family that owns and runs it, had just presented some impressive numbers.
Revenue had surged 28% to R9,8bn, operating income had risen 16,1% to R627m and headline earnings per share were up 19,2% to 101,5c for the year to February 2001.
There was also a generation shift with founder Bill Venter’s youngest son, Robbie, taking over the job of CEO from his father while Bill stayed on as chairman. Over the next few years Bill’s oldest son Craig would make a name for himself running one of the subsidiaries, Allied Technology Corp (Altech).
Looking at the numbers, one scribe noted the future of the group looked as though it was in safe hands — which prompted an analyst to say things were going well then but, if things went badly, “would Bill fire his own sons?”.
That was never going to happen. Altron is a listed company but it should be seen more as a family business that has outside shareholders. With Bill Venter holding 56% of the shares, minority shareholders have never been well positioned to push through an agenda not backed by the family.
The Venter brothers were never going to be forced out but this did not mean they would be running the business forever. Even so, the announcement earlier this month that Altron was looking to bring in outside management to eventually take over from the brothers came as a surprise.
Robbie Venter says there was no specific incident that sparked this change, just a recognition that there was no one to take over from them.
“After 50 years, Altron is transitioning into a new era and we recognise that a technology company like ours needs to continually evolve. There is no ready third-generation family management and as a result we will be transitioning to an independent management structure in a phased approach over time.”
Robbie Venter declined to give a timeline for the change but stressed it was not imminent because, as he put it, there were “a few critical projects” that needed to be concluded and that was its immediate priority.
With the family preparing to give up management control, does this mean that it would consider relinquish its shareholding in the group?
“Absolutely not,” he says. “The Venter family plans to retain its shareholding in Altron and is still very committed to the group from a shareholder perspective.”
He says that given the scale of its investment in Altron, the family will still be involved in the group but in a more strategic as opposed to an operational way.
It is hard to imagine the Venter brothers sitting by as the company they have been a part of and run for most of their careers is taken over by another team. Their passion for the company is legendary. There are stories, for instance, of Craig checking contracts that had already been finalised until 11pm and then taking work home.
Though they are known for their commitment to the cause, Irnest Kaplan, MD of Kaplan Equity Analysts, points out that they currently have more of an oversight role and are not as operationally involved.
Even so, Kaplan notes: “It remains to be seen if they can do it.”
News that they were looking to bring in outside managers to run the group did come as a surprise to Kaplan, but when he spoke to them it became clear that without a family member ready to take control, this step “basically looked inevitable”.
Since Robbie became CEO in 2001, revenue has grown from just under R10bn to R27,6bn and the share price has risen from around R8 to R13,60.
The numbers, however, do not tell the full story. The group has also taken a few knocks under the brothers’ control.
Its attempt to run a fibre network in Kenya cost it millions and its video-on-demand service has run into problems.
Its latest results illustrate the difficulty it has been going through. Revenue was down 1%, it incurred a R26m loss for the year and its share price has tumbled from a year high of R27,75.
But this does not mean there is no value. At a PE of 14,89 there is a lot of value for a company that has a record of producing good earnings — regardless of who runs it.