EOH sells Sybrin

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EOH sells Sybrin

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Published Date: 2021-06-09 | Source: INCE|Community | Author: The Finance Ghost

EOH sells Sybrin

EOH's daily grind at the moment is to sweep out all the dirt of its sordid past, while trying to keep the bankers at bay. It's not easy.

The company has now announced a deal to dispose of its entire stake in Sybrin Limited and Sybrin Systems for a cash consideration of R334m. The purchaser is that well-known brand, K2020893770 South Africa (Pty) Ltd.

I always have a chuckle when a shelf company is used for deals like this.

If we focus on the investors rather than their investment vehicle of choice, we can see that the purchaser is backed by a consortium of One Thousand & One Voices (a private equity investor) and Isaac Mophatlane who has an extensive background in the ICT market.

Sybrin services the banking, financial services and insurance sectors. It also does government work, hopefully not with the track record that the rest of EOH is infamous for.

Sybrin was acquired by EOH back in 2013, when a number of JSE-listed companies were on an acquisition spree and investors just couldn't get enough of these acquisition machines. The SENS announcement notes that the limited capital available to EOH is now hindering Sybrin's growth, which shows just how far EOH has fallen. Whilst EOH and its shareholders will be unhappy to say goodbye to one of the innovative businesses in the group, the sale will be welcomed as part of the deleveraging plan.

The deal was only done at an EV/EBITDA multiple of 5.3x which is at the low end of the expected range. It's never great to be a desperate seller with bankers breathing down your neck.

The final price may be adjusted upwards or downwards based on Sybrin's financial performance for FY21, a period which ends on 31 July 2021.

In case you're wondering about how the Competition Commission might act here, K2020893770 South Africa is light on branding but strong on empowerment credentials. The entity is 51% Black-Owned.

EOH traded down -2.66% on the day, closing at R6.96 per share.

Disclaimer: the author holds shares in EOH





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