By David Dolan

South Africa’s Allied Technologies Ltd is in talks to pay up to Sh5.88 billion ($60 million) for unlisted Kenyan IT firm – Symphony.

According to a person familiar with the matter, the buyout is aimed at helping Altech revive its struggling business in East Africa.

Johannesburg-based Altech, a $742 million telecoms and IT firm, has been in talks to buy Symphony for several months and is nearing the end of its due diligence, said the source, who declined to be identified because the information is not yet public.

Altech is likely to pay between $50 to $60 million for Symphony, giving it a price-to-earnings ratio in the teens, the source said.

Buying Symphony, which also has operations in Uganda, Rwanda, Burundi and Ethiopia, would augment Altech’s existing business in a region where it has struggled.

"I think it would be a good fit," said Dirk Noeth, an analyst with Avior Research in Cape Town.

"It helps them expand their services base from just being a fixed-network provider to a system integrator as well... You need a business like this to really drive it further."

Altech in September replaced the head of its underperforming Kenyan data unit and named a new team to lead its East African operation. Turning around the region’s business is a "top priority", Altech said then.

South African firms are increasingly looking to do deals beyond their crowded home market to tap rising disposable incomes in poor but fast-growing regions such as East and West Africa. The deal would be one of the biggest acquisitions made by a South African company in Kenya, according to Thomson Reuters data.

It would also be the second-largest merger and acquisition deal in Kenya this year following East African Breweries’ Sh22 billion ($225 million) buy-back of an asset stake from SABMiller.

Big Potential

The deal also highlights the growth potential for IT companies in Africa. Japan’s Nippon Telegraph and Telephone Corporation last year paid $3.2 billion for South Africa’s Dimension Data to expand in emerging markets.

Altech is a diverse business whose operations include telecoms, electronics and IT services. In South Africa, it is best known for its Altech Netstar unit, which tracks and recovers stolen cars.

Symphony provides IT consulting and services including hardware, software and networking. It is owned by the Da Gama Rose Group, led by prominent Kenyan businessman Horatius da Gama Rose.

Its partners include IBM, Cisco Systems, Dell Incorporation, General Electric Company, Microsoft Corporation, China’s Lenovo Group and Huawei Technologies, according to its website.

— Reuters