A court battle could be on the cards after a deal between CZ Electronics and Seemahale Telecoms to design and develop South African-manufactured smartphones and tablets collapsed last week.
CZ Electronics, which owns a hi-tech manufacturing facility on Johannesburg’s East Rand, announced on Friday that a company called Mint Electronics had acquired a 75% stake in its business. Mint Electronics is headed by former South African Revenue Service commissioner Oupa Magashula.
Last year, Seemahale agreed to buy 51% of CZ Electronics pending the fulfilment of certain conditions, including a contract to supply the South African-built smart devices to a telecommunications operator.
But Seemahale Telecoms CEO Thabo Lehlokoe says he first became aware of the deal to sell 75% of CZ’s equity to Mint Electronics on Friday, when the parties issued a media statement about the transaction.
“All we can say is that there is a dispute and we have sought legal advice,” Lehlokoe tells TechCentral. He says he is surprised by the developments given that the parties recently secured an order from one of South Africa’s big mobile operators for locally made tablets.
In response, CZ Electronics chief operating officer Rob Bruggeman says his company signed a memorandum of understanding (MOU) with Seemahale Telecoms in October 2013 in terms of which “certain performance criteria” had to be met to allow Seemahale to proceed with a formal agreement to purchase 51% of the company. “The MOU expired on 31 March 2014. As the MOU criteria were not met, no further agreements were entered into.”
Bruggeman says threats of legal action are unfounded, but the company will defend itself in court if necessary. He says, too, that he is unaware of any order for locally made tablets from a South African mobile operator.
In their media statement, CZ Electronics and Mint Electronics say they still intend releasing their South African-built smartphones and tablets in 2014.
CZ Electronics was established in 2002 following the acquisition of the production assets of an Alcatel factory in Boksburg. The company employs 300 people and has invested about R10m in research and development in the past 24 months. It plans to assemble the smartphones and tablets at the factory, and will use sophisticated surface mount technology to build the integrated circuit boards used in the devices.
“CZ Electronics has identified the need to restructure its shareholding in order to introduce a new partner who will address both capital requirements and its empowerment credentials,” the two companies say in the media statement.
The value of the deal has not been disclosed, but they say that the amount “materially reflects the net asset value of CZ Electronics”.
Bruggeman says that prior to formalising its deal with Mint, the company “explored many other opportunities to find a suitable partnership”.
“Now, with Mint Electronics, we have found a partnership that will enable us to successfully deliver on our strategy.”
Mint Electronics is a subsidiary of Sekoko Holdings, a black-owned mining and energy company founded by Limpopo businessman Tim Tebeila. Sekoko says its decision to invest in CZ Electronics is based on its need to expand into new industries and to reduce its overall exposure to mining.
The CZ manufacturing facility has a capacity of about 280 000 components per hour. It specialises in electronic assemblies for the telecoms, signalling telemetric, defence, utility metering, vehicle tracking and data acquisition industries.
“Designed to the highest specifications and built in accordance with the ISO 9002:2008 standard, we believe our smartphones and tablets will revolutionise the market, offering ordinary South Africans a highly competitive alternative to existing products,” Bruggeman says in the statement. — (c) 2014 NewsCentral Media
- See also: SA-made smartphones to make debut
