South African defence group Reutech, part of the Reunert group, has acquired Nanoteq from Business Connexion and minority shareholders, with the integration of Nanoteq into Reunert beginning from 1 October.
Based in Centurion, Nanoteq was established in 1988 with the core focus of developing cryptographic technology for hardware for military radio systems and mobile telephones.
The Competition Commission approved the acquisition and resultant merger on 13 September, but imposed some conditions. It said that as the merger results in a vertical overlap in that Nanoteq supplies Reutech with customised cryptographic products that are for use in Reutech tactical radios.
“The Commission found that customised cryptographic products and tactical communication systems products are developed specifically for the SANDF and are critical inputs in the manufacture of communication equipment used for national security. Given that the merging parties are single source suppliers, it is likely that the merger will enhance the bargaining power of the merged entity and this may result in higher prices as Armscor cannot switch to the merging parties’ international competitors for national security reasons.
“In order to address concerns emanating from the proposed merger, the Commission has imposed a condition that the pre-merger Nanoteq pricing methodology in relation to the Armscor contracts shall remain unchanged post-merger.
“The merging parties have also under taken to conclude an agreement with Armscor which will address matters pertaining to protection and control of Sovereign and Strategic Intellectual Property and also ensure that there is inclusive participation of defence companies in general moving forward,” the Competition Commission said.
“The conditions imposed on the merged entity will ensure that Armscor, being the sole customer in South Africa, is not exploited post-merger through anti-competitive means. These conditions are significant as they guarantee that the pricing methodology for the products supplied to Armscor remains unchanged and that the relevant intellectual property rights in relation to the products supplied to the SANDF vest with Armscor,” said acting Competition Commission Deputy Commissioner, Hardin Ratshisusu.
The Competition Commission confirmed on 20 September that the parties had complied with the imposed conditions and could proceed with the merger.
“Nanoteq fits well strategically and will complement our secure tactical radio communications company, Reutech Communications,” said Reunert CEO Alan Dickson. “It has a diverse customer base, including recurring and export business, with an exciting growth trajectory.”
“Through capitalising on Reutech’s and Reunert’s international presence, our joint efforts will be instrumental in further unlocking the value of Nanoteq in the international market,” said Gerrie Venter, CEO of Nanoteq.
