R335-million deal for prominent South African computer company back on track

Novus Holdings has won its appeal against the Takeover Regulation Panel (TRP), which had ordered it to withdraw and resubmit its offer to acquire Mustek.

Mustek is one of the oldest computer hardware distributors in South Africa. Novus acquired over 35% of Mustek in November last year, triggering a mandatory buyout offer.

The TRP had unconditionally approved Novus’ firm intention announcement (FIA) about its offer, which was released on 15 November 2024.

It then ordered Novus to withdraw and resubmit it, which the company vowed to challenge in court.

Novus appealed the TRP’s ruling on an urgent basis. In a notice to shareholders published on the JSE News Service, it reported that the appeal was heard in the High Court on Friday, 25 April 2025.

“On 26 April 2025, an order was granted by the High Court declaring the TRP’s ruling unlawful, unconstitutional and set aside,” Novus said.

“The order directed Novus to post an offer circular reflecting its FIA and supplementary firm intention announcement within five days of the date of the order.”

Novus explained that the court order also allowed the Takeover Regulation Panel to set a later date after consultation with Novus.

“The TRP was ordered to pay the cost of the application, including the cost of two counsel,” Novus said.

It also published the TRP’s position, which said it was evaluating the High Court’s decision and how it affects its regulatory authority.

“However, the panel also confirmed that it will take the necessary next steps while fully reserving the right to reconsider the issue once the court shares its reasoning for its decision,” Novus stated.

According to the TRP, it would implement the court’s order in the meantime to avoid delaying the transaction and allegations of contempt of court.

Under Novus’ proposed deal, shareholders who elect to sell can choose between receiving cash, shares, or a combination of cash and shares.

Novus has offered a price of R13 per Mustek share. Mustek’s share traded at R13.74 by market close on Tuesday.

Alternatively, shareholders can sell for R7 plus one Novus share, or trade one Mustek share for two Novus shares. Novus closed the day at R6.60.

The company delivered an irrevocable unconditional guarantee issued by Investec for the maximum amount payable under its mandatory offer, which is R335 million.

The long stop date for obtaining the necessary regulatory approvals is 31 July 2025.

If the deal’s suspensive conditions are not fulfilled by then, Novus said it would sell some of its Mustek stake so that its shareholding becomes less than 35%. It said it would follow the Takeover Regulation Panel’s directions in this regard.

Novus also reported that it had received irrevocable undertakings from three Mustek shareholders comprising approximately 20.29% of all issued shares that they would reject the buyout offer.

These shareholders are the DK Trust, Mustek managing director Neels Coetzee, and Mustek group chief executive officer Hein Engelbrecht.

Takeover Regulation Panel takes aim

The Takeover Regulation Panel issued a scathing ruling in February that chastised the merger parties for not initially being forthcoming about their deliberations leading up to the proposed deal.

It also revealed that Engelbrecht was a trustee of the DK Trust, together with Michael Kan.

“The DK Trust is deemed to be a concert party of Novus in relation to the mandatory offer,” the regulator ruled.

Novus’ acquisition of a sizeable stake in Mustek and subsequent mandatory offer comes after Umthombo Wealth chief investment officer Alex Duys said the company could become a target for corporate action.

Duys and Protea Capital Management CEO Jean Pierre Verster previously said that Mustek was a good investment opportunity because it is a good company that is undervalued.

Mustek’s low valuation also makes it an acquisition target. Many companies may see it as an opportunity to buy the distributor at a bargain price.

While Mustek’s results have suffered in recent years, analysts expect this to improve in 2025.

They explained that the 2020 lockdown was good for Mustek as the work-from-home revolution forced companies and workers to upgrade their home technology.

Mustek’s results should improve as the upgrade cycle kicks in following this buying frenzy.

Duys explained that Mustek previously took pain because it overstocked on renewables. Eskom’s load-shedding reprieve dropped demand for these products.

However, there was still demand for these products, and they were still selling them — albeit at lower margins.

Mustek’s management said they are actively addressing the working capital issue, which will release a lot of cash.

The higher cash flow will reduce the company’s debt and interest payments. In turn, earnings will increase. This is expected in a year or two.

In March, the Competition Tribunal conditionally approved the proposed transaction after the Competition Commission gave its stamp of approval at the end of February.

According to the Commission, it was unlikely that the transaction would substantially lessen or prevent competition in any market.

However, to address employment-related public interest concerns, Novus and Mustek agreed to a two-year moratorium on retrenchments. They would also give preferential employment conditions for employees Mustek retrenched before the transaction.

The Tribunal said it approved the proposed merger subject to employment-related public interest conditions.