Control Instruments (CI) and Pi Group have reached an agreement that will see CI buy out a subsidiary of the UK firm for lb5 million, says Investec Bank.
Pi Technology specialises in the automotive arena and is based in England. Its offerings include a range of electronic products, specifically in the areas of engine control systems, infotainment and information displays, alternative fuel applications - including hybrid technology - and body and suspension control electronics.
CI says the rationale for the decision is based on its strategy to globalise its business and its previous investigation into the viability of establishing a UK-based European sales, engineering and purchasing operation.
As a result of its investigation, the company decided to "expand its existing relationship with Pi Group, rather than start a new operation," it says in a statement.
"The acquisition of Pi Technology is the next logical step in the process of cementing the relationship between the companies and allows the group to expand its original equipment manufacturer (OEM) operation from a solid and well regarded international base that is profitable and cash positive."
Cash deal
The purchase price of lb5 million, or R71.9 million at an exchange rate of R14.38, will be paid for in cash and the deal is expected to be effective towards the end of November.
Illustrative effects of the acquisition, prepared by CI, indicate earnings per share should go up 5.5%, from 32.8c to 34.6c. Headline earnings per share should increase 9.8%, from 17.4c to 19.1c; however, net-asset value will be marginally down.
Pi Technology, founded 14 years ago, has satellite offices in Detroit, in the US, and in Frankfurt, Germany. It employs 90 engineers, most of whom have high-grade technical degrees and experience in systems engineering, and hardware, software and electronic design for the automotive industry.
It also provides consulting services to the OEM automotive industry and its first level suppliers and has experience in development projects such as systems engineering, advanced technology demonstrators, production designs and fast-track projects.
Control Instruments Shurlok and Pi Technology will be run as one business, and management and staff of both companies will be retained. Certain functions such as sales, marketing, new business and product development will be run out of the UK, US and Europe, while manufacturing, some engineering facilities and customer support for South African OEMs will continue to be based in SA.
CI's shares closed unchanged at R5.25. Its 12-month high is R6.50 and its 12-month low is R4.25.
Related stories:
CI sees lower headline earnings
Control Instruments to boost profit
Control Instruments buys US firm
Share