Selco drops acquisition plans

THE Johannesburg Stock Exchange (JSE) has questioned the accounting treatment of Southern Electricity Company’s (Selco) planned acquisition of three companies, prompting the Namibia-based company to walk away from the transactions.

The deals, which the company announced in June, would have consolidated the business of Resource Management Integration Group, Selco’s controlling shareholder, into a single listed entity.

Selco wanted to buy utility specialist Rural Maintenance, technology company Netelek and Netelek Technology, a provider of energy and natural resources management solutions.

Selco distributes electricity procured from the transmission grid users located in the southern Namibian towns of Keetmanshoop, Karasburg and Aranos.

The deals were part of a plan to improve corporate governance, ensure future growth, increase the business’s size and retain skilled employees, the company said at the time.

The new acquisitions were also meant to enhance Selco’s revenue generation and profitability.

The agreements were subject to the fulfillment of various conditions by the end of last month.

Those conditions included an approval by Selco’s shareholders. But the company last week announced the cancellation of the transactions.

The company “had proceeded with the transactions on the basis of advice given to it on the IFRS (international financial reporting standards) accounting treatment of the transaction,” it said in a statement.

“However, the JSE has referred the matter to the GAAP (Generally Accepted Accounting Principles) Monitoring Panel, which has questioned this accounting treatment.

“If the transactions were to be accounted for on the alternative basis being debated, [Selco’s] board does not believe that the shareholders would view it as being in their best interest.

“Accordingly, it will not seek to extend the date for the fulfillment of the conditions precedent,” Selco said.

The company also announced the resignation of CEO Chris Bosch, finance director Ilze Bosch and executive director Sannah Nyovane, which it said was in line with JSE requirements.

“The rationale for the restructuring of the board is to separate the business of [Selco] from that of the other entities to whose business the aforesaid ex-directors are core,” it said. – Business Day

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