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Ghost Bites (Anglo American | Choppies | Ellies | Gold Fields | Impala Platinum | Kibo Energy | Renergen | Textainer)

The Finance Ghost
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Ghost Bites (Anglo American | Choppies | Ellies | Gold Fields | Impala Platinum | Kibo Energy | Renergen | Textainer)

Anglo American looks to raise 10 year USD debt (JSE: AGL)

Here’s your latest data point on the USD yield curve

I find major debt raises very interesting, particularly at the moment when the yield curve is all over the place. The latest example is Anglo American and its intention to raise $900 million in senior notes due in 2033. In other words, this is highly secured funding (from the perspective of the lenders) that Anglo will be able to use for a period of 10 years.

The company is offering to pay 5.5% on these notes, though what usually happens is that pricing is discovered through a bidding process and the final rate is sometimes adjusted. The mechanism to do this is to issue the notes at a discount or premium, depending on where the pricing ended up vs. the 5.5% coupon.

Time will tell whether there is sufficient appetite at Anglo’s intended price.

Choppies clarifies its position (JSE: CHP)

The company has reminded shareholders that it doesn’t own Choppies South Africa

Choppies is upset about an article in the Financial Mail that the company believes made it sound like the listed group could be in discussions with potential acquirers.

The point that the company has clarified is that Choppies South Africa was sold by the group more than three years ago. The new owner was only allowed to use the name for three years, a period that has already expired obviously.

In other words, any speculation related to Choppies South Africa has nothing to do with the listed company.

Ellies needs to be patient for Bundu (JSE: ELI)

The fulfilment date for conditions precedent has been extended

Fun fact: deals take a long time to close. They usually take longer than people expect, which is a great source of annoyance for everyone involved, especially those who are waiting to be paid a success fee. Yes, I speak from experience here!

The latest example is the Ellies acquisition of Bundu Power for up to R202.6 million, a significant deal for Ellies that has come at a premium valuation multiple. Ellies is rather desperate to evolve its business and Bundu Power has found itself in the right darkness at the right time, with Eskom doing wonderful things for the shareholders of that business.

There’s been quite a delay in the implementation of the deal, although no details are given on the source of the delay. The original date for fulfilment of conditions precedent was 30 April 2023, which has clearly come and gone. This has been extended to 31 August 2023.

A windfall for Gold Fields (JSE: GFI)

The company announced a new partnership in Canada

Before getting into the details of this story, I just have to point out this chart and how ridiculous the volatility actually is when it comes to gold miners:

Gold might be a source of returns that aren’t correlated with the rest of the market, but there is absolutely nothing steady about them. The recent chart looks like Zoom in the pandemic!

The latest news from Gold Fields is a partnership with Osisko Mining to develop and mine the Windfall project in Canada. Let’s hope that the name is a sign of things to come, as the investment for a 50% stake is C$600 million and that’s before any of the capital expenditure related to the project.

There are also a couple of exploration projects as part of this deal, with Gold Fields committing to fund the first C$75 million worth of development expenditure on them before the 50-50 split kicks in for remaining expenses.

The Windfall project has a life-of-mine of 10 years (which Gold Fields thinks is conservative) and an all-in sustaining cost (AISC) of $758/oz, which would make it one of the lowest cost mines in the portfolio.

And let’s face it: Canada is a low-risk jurisdiction in which to mine gold, which certainly doesn’t hurt the story.

First production from this asset is expected in 2025.

Impala Platinum’s production is under pressure (JSE: IMP)

We now have data for the nine months to March

Impala Platinum sources its production in various ways, ranging from managed volumes through to joint ventures. When all of that rolls up to the top, total 6E group production volumes fell by 9% for the nine months and sales volumes were 5% lower.

The blame has been laid squarely at the door of “load curtailment” which appears to be the mining industry’s way of describing Eskom’s ongoing failure to do anything useful for South Africa.

Things are tough at the moment for Implats. Full year production is likely to be at the lower end of guidance and unit costs are expected to be at the top end of provided guidance. And against this backdrop, the company is still trying to get the Royal Bafokeng Platinum deal across the line!

Kibo Energy releases interesting test results (JSE: KBO)

Could biofuel be a realistic alternative to conventional coal?

Kibo Energy is hoping to supply solid biofuel as an alternative to conventional coal, targeting international companies in the manufacturing industry.

The company has put its biofuel through testing by accredited laboratories and results are encouraging, with the selected biomass even outperforming conventional coal on some metrics.

After all the manure we’ve dealt with from Eskom, imagine a world where it runs on the stuff? Just kidding – I don’t think that Kibo’s biofuel is made from manure. I stand behind the rest of the sentence, though.

Renergen releases its annual report (JSE: REN)

This is a good opportunity to recap the key points about the company

At this stage, the revenue number in Renergen is a little pointless. Although the company is now selling liquefied natural gas (LNG), revenue of R12.7 million for the year is absolutely insignificant in the context of the Virginia project’s long-term story around helium in particular.

There were a major of key strategic developments in the past financial year, ranging from the successful equity due diligence by the Central Energy Fund through to credit due diligence by the US International Development Finance Corporation and Standard Bank.

I must pause there to point out the importance of the US relationship to Renergen at a time when our government is cozying up to Russia far more than the West. You simply cannot ignore the impact and risks of geopolitics. Renergen is looking to raise capital on the Nasdaq, so there are equity and debt capital raises underway with US counterparts. Critically, a significant source of future demand is the US, particularly given the initiatives in that country to onshore semiconductor (computer chip) production in response to risks around China and Taiwan.

Like I said, you cannot ignore geopolitics with something as strategically important as helium. Risks in Taiwan will drive demand from the US, provided we don’t sour our relations with the West.

As the company works towards commercial operation of the all-important Phase 2 project by 2026, there will be no shortage of volatility. If you want to gain a better understanding of the investment story, my Ghost Stories podcast with CEO Stefano Marani from February 2023 will be useful:

Take note that it was recorded before the details of the IPO were announced. Renergen is looking to raise $150 million during 2023 and doesn’t envisage needing more equity capital for the year after the IPO.

Textainer Group: watch the trend (JSE: TXT)

This is as cyclical a business as you’ll find

In the shipping business (and the related container business that Textainer is in), you need to constantly keep an eye on the numbers. This is the furthest thing from a buy-and-hold industry, as shipping is incredibly cyclical. We’ve seen Grindrod Shipping selling ships to pay down debt and we can now see revenue falling off its peaks at Textainer.

The biggest difference is actually the gain on sale of containers, which was significantly lower in this quarter than in prior quarters. Income from operations was just over $100 million in this period vs. $114 million in the comparable quarter last year. Net income attributable to common shareholders was $53.6 million vs. $72.7 million.

Average fleet utilisation has dropped to 98.8% from 99.7% a year ago.

Against headline earnings of $1.22 per share, the board has declared a dividend of $0.30 per share.

Little Bites:

  • Director dealings:
    • Des de Beer has bought R4.85 million worth of shares in Lighthouse Properties (JSE: LTE).
    • An associate of a director of Rex Trueform (JSE: RTN) has bought N shares worth R214k. N shares in African and Overseas Enterprises (JSE: AON) – part of the same overall group – were also bought with a value of R152k.
  • A non-executive director of Capitec (JSE: CPI) has entered into a huge hedging trade over shares worth R1.46 billion. The put strike price is R1,461 and the call strike is R2,517 per share. The average expiry date on the derivatives is just over 3 years.
  • If you are a shareholder in Absa (JSE: ABG), then you will be interested to know that the circular related to the B-BBEE transaction has been posted. I still think this was a huge missed opportunity to give retail investors another structure to invest in on the market.
  • The delisting of Jasco Electronics (JSE: JSC) is taking longer than planned because of delays in obtaining a compliance certificate from the Takeover Regulation Panel.

Unlock the Stock: TWK Investments

The Finance Ghost
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Unlock the Stock: TWK Investments

Unlock the Stock is a platform designed to let retail investors experience life as a sell-side analyst. Corporate management teams give a presentation and then we open the floor to an interactive Q&A session, facilitated by the hosts.

This year, Unlock the Stock is delivered to you in proud association with A2X, a stock exchange playing an integral part in the progression of the South African marketplace. To find out more, visit the A2X website.

We are also very grateful to the South African team from Lumi Global, who look after the webinar technology for us.

In this eighteenth edition of Unlock the Stock, TWK Investments returned to the platform to talk through a tough recent financial period, with particular focus on the long-term prospects of the company.

As usual, I co-hosted the event with Mark Tobin of Coffee Microcaps and the team from Keyter Rech Investor Solutions. Watch the recording here:

Ghost Wrap #22 (Glencore | Anglo American | Sibanye-Stillwater | Capital Appreciation | MTN Nigeria | Prosus)

The Finance Ghost
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Ghost Wrap #22 (Glencore | Anglo American | Sibanye-Stillwater | Capital Appreciation | MTN Nigeria | Prosus)

Welcome to Ghost Wrap. It’s fast. It’s fun. It’s informative.

In this week’s episode of Ghost Wrap, we cover:

  • Glencore’s dealmaking prowess, with the Teck Resources board pressured into giving the company a chance and Glencore executing an unrelated deal in Brazil for aluminium and bauxite assets for good measure.
  • Anglo American’s recent production update and the importance of the Quellaveco asset, along with the year-on-year declines in commodity prices in dollars.
  • Sibanye-Stillwater’s Keliber project in Finland and the support from the Finnish government in the form of out outsized equity investment in the project.
  • Smart dealmaking from Capital Appreciation in the acquisition of Dariel Solutions, with a deal structure and valuation that seems to make a lot of sense.
  • MTN’s quarterly results in Nigeria, showing the importance of reading ALL the way down the income statement.
  • The Prosus share buyback programme and the ongoing sale of shares in Tencent.

The Ghost Wrap podcast is proudly brought to you by Mazars, a leading international audit, tax and advisory firm with a national footprint within South Africa. Visit the Mazars website for more information.

Listen to the podcast below:

Ghost Bites (Glencore | Industrials REIT | MC Mining | MTN | Reinet | Sasol | Southern Palladium)

The Finance Ghost
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Ghost Bites (Glencore | Industrials REIT | MC Mining | MTN | Reinet | Sasol | Southern Palladium)

Glencore is proof that perseverance can work (JSE: GLN)

To the dismay of Teck’s board, its shareholders are taking notice of Glencore

I suspect that “Glencore” is a swearword in the average household of a Teck Resources board member in Canada. After initially approaching the board and then improving its proposal, Glencore suffered a double rejection that led to a letter being released to Teck Resources shareholders.

It seems to have landed, because Teck decided to withdraw its separation proposal. In other words, the Teck board has realised that the Glencore proposal isn’t going to just disappear and that shareholders deserve a chance to consider it. Even if the board won’t take the offer to shareholders with its blessing, Glencore has said more than once that it is willing to make the offer directly to shareholders. This would be a textbook example of an attempted hostile takeover.

Even with all of this going on with Teck, Glencore isn’t sitting on its hands. On the aluminium side of the business, Glencore is agreed to acquire a 30% stake in Alunorte S.A. and a 45% stake in Mineracão Rio do Norte S.A. (MRN) with the counterparty to both deals being Norsk Hydro ASA.

The combined value of those deals is $775 million and the effective date is 30 June 2023. Due to various adjustments that are expected to be made to the price, the expected payment is $700 million.

Alunorte is the world’s largest alumina refinery outside of China, located in Brazil. MRN is an open case bauxite mine located in Brazil. Bauxite is the main ore of aluminium and Alunorte is one of the biggest customers for MRN’s bauxite.

This is another reminder of what a force of nature Glencore actually is. With a market cap of around R1.35 trillion, this is a huge commodity platform business that can pull a few levers and make huge steps in exposure to so-called “transition metals” – with the Teck deal as a particularly large attempt in that space.

Industrials REIT remains defensive (JSE: MLI)

The update for the fourth quarter reflects a healthy business

If you’ve been regularly reading your Ghost Bites, you’ll know that Industrials REIT is currently under offer from Blackstone. This will need to go through a shareholder approval process, along with an extensive regulatory process for a deal of this size.

In the meantime, the company has to stay up to date with reporting requirements. This also helps investors make an informed decision about the offer.

In the fourth quarter of the 2023 financial year (covering the three months to March 2023), the company gave a mix of quarterly and annual numbers for investors to chew on. For example, Industrials REIT achieved 4.8% like-for-like growth in passing rents and 10.6% growth in estimated rental values over the full financial year.

And in this quarter specifically, there was an average uplift in rent of 27% on all lettings signed during the quarter. The supply-demand dynamics remain favourable in this property sector, allowing the company to achieve substantial increases in rent when leases come up for renewal. Through its Industrials Hive platform, the company is focused on having relationships directly with tenants by showcasing its available properties through an in-house web platform.

The sale of the care homes joint venture in Germany was completed in April, so the portfolio is now purely focused on multi-let industrial units. This is part of why it fits so neatly into a portfolio run by the likes of Blackstone.

The loan-to-value (LTV) ratio was 29% on 31 March 2023. The average cost of debt is 2.8% and average maturity is 3.2 years, with loan extensions that could take that to 4.4 years.

MC Mining had a mixed quarter (JSE: MCZ)

Production at Uitkomst was sharply down year-on-year, but exports are here

With “challenging geological conditions” in addition to localised flooding and of course load shedding, MC Mining suffered an 18% drop in production at Uitkomst Colliery, measured on a year-on-year basis. Sales were higher though, with the particularly good news being that a big portion of domestic sales has now been rerouted to export sales after management initiatives in that space.

The company is also busy with the Makhado hard coking coal project, with a detailed implementation plan having been formulated and put into action for the first five years of mining and processing operations.

At the outsourced Vele Aluwani Colliery which was recommissioned in December 2022, mining and processing of coal ramped up and 48,518 tonnes of thermal coal was delivered during the quarter. For context, Uitkomst produced 101,616 tonnes this quarter.

The company had cash of $14.1 million at the end of the quarter vs. $20.2 million at the end of December.

MTN Nigeria and Ghana release results (JSE: MTN)

If you are invested in MTN, you need to follow the subsidiaries in Africa

I always enjoy the release of results by MTN’s African subsidiaries. They tell us so much about business in Africa in general – a high growth region that is fraught with currency risk. Companies that can grow in-country with internally generated cash flows (like MTN) can make it work. Those that are trying to bring the cash home to deal with South African debt are in trouble (like Nampak).

Starting with Nigeria, the data story continues with active data users up by 14.7% vs. mobile subscribers up by 9.4%. Active mobile money wallets grew from 2 million to 3.2 million!

Some margin pressure is coming through, with service revenue up by 20.5% and EBITDA up by 17.7%. EBITDA margin fell by 130 basis points to 53.3% – still a huge number.

The story deteriorates thereafter, with profit before tax up by just 8.5% and earnings per share by 3.8%. Why is this the case? The clue lies in the EBITDA acronym – Earnings Before Interest, Taxes, Depreciation and Amortisation.

Depreciation and amortisation increased by 23.4%, a function of MTN’s significant capex investments in the country. Net finance costs are a bigger issue, up by a whopping 42.2% with inflation in Nigeria at a 17-year high and the Monetary Policy Rate in the country up to 18%.

At first blush, it seems as though MTN is cutting back on investment, with capex down by 25.8%, or down by 47.8% excluding right-of-use assets. Accounting weirdness aside, the insight here is that capex has slowed down considerably. If you read through the details of the announcement, you’ll find commentary around a high base for capex and supply chain challenges in this quarter that impacted the capex growth rate. They expect a “ramp-up” in capex during the rest of the year, so it wouldn’t be correct to say that MTN is slowing down on investment in Nigeria. With net debt to EBITDA of 0.2x, there’s still plenty of financial headroom even if finance costs are showing a worrying trajectory.

I would love to give you the details on Ghana but the MTN Ghana investor relations website was down when I tried to access it. I’ll check back in this week to see what I can find.

Reinet gives us a clue about its NAV move (JSE: RNI)

Reinet Fund’s NAV move is a precursor to Reinet Investments

Reinet is an investment holding company that primarily holds shares in Pension Insurance Corporation and British American Tobacco. That’s a defensive portfolio of note.

Like all investment holding companies, the key metric is Net Asset Value (NAV) per share. Before the listed company releases its NAV update, Reinet announces the quarterly NAV of the Reinet Fund, the vehicle through which the investments are held.

These NAVs aren’t exactly the same, as there are balance sheet items at Reinet Investments level that you won’t find in Reinet Fund. It does give a very strong clue as to the percentage movement in the NAV though.

At Reinet Fund level, the NAV has decreased by around 1.3% from December 2022 to March 2023.

Sasol raises more US dollar funding (JSE: SOL)

Sasol is attractive to global lenders and fixed income investors

One should never assume that a successful debt raise is an indication of returns coming the way of equity investors. The metrics involved are completely different, as fixed income is all about debt affordability and equity is all about growth. Still, it’s never a bad thing when a company is appealing to debt providers.

Sasol has raised $1 billion through the issuance of notes (debt instruments) that mature in 2029. The rate is 8.75% per annum, so that gives you an idea of where the dollar yield curve is and the kind of risk premium that Sasol needs to offer.

The orderbook reached over $2.3 billion, so this raise was 2.3x oversubscribed.

Together with the recent extension of its dollar loan maturity, Sasol has full pre-funded the March 2024 bond maturity.

Southern Palladium signs off on a busy quarter (JSE: SDL)

Drilling, drilling and more drilling

Southern Palladium is firmly in drilling and exploration mode. You need to be a geologist to really understand the updates on SENS, so I usually just look for commentary from management around whether the drilling results are in line with expectations or not.

Having done wider drilling in this quarter to figure out which of the four potential development scenarios is the most favourable, the next quarter will be about narrower infill drilling to increase confidence levels from Inferred to Indicated.

As at the end of March, the company held $12.93 million in cash vs. $14.20 million at the end of December 2022.

Little Bites:

  • Director dealings:
    • A non-executive director of Hammerson (JSE: HMN) has acquired shares worth £8.9k.
    • An associate of a director of Ascendis Health (JSE: ASC) has bought shares worth nearly R92k.
  • African Rainbow Minerals (JSE: ARI) has announced that CEO Mike Schmidt has stepped down after 11 years in the job. He will stay on as Executive of Growth and Strategic Development. The current COO, Phillip Tobias, has been appointed as CEO with effect from 1 May 2023. It’s always good to see internal appointments like this.
  • The AB InBev (JSE: ANH) dividend has been approved by shareholders. A dividend of €0.75 will be paid to holders on the JSE register on 5th May.
  • If you are a shareholder in Kibo Energy (JSE: KBO), you’ll be interested to know that subsidiary Mast Energy Developments has released its annual report. Recent activities have focused on the Pyebridge project site, the construction and development of the Bordesley project and the acquisition of two reserve power projects.

Ghost Stories #13: Offshore or Offsides? Objectively Assessing Exposure with Nico Katzke (Head of Portfolio Solutions at Satrix)

The Finance Ghost
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Ghost Stories #13: Offshore or Offsides? Objectively Assessing Exposure with Nico Katzke (Head of Portfolio Solutions at Satrix)

In this episode of Ghost Stories, Nico Katzke (Head of Portfolio Solutions at Satrix) returns to the platform for another fantastic discussion on a variety of finance topics, with the key theme being offshore vs. local investment.

With all the stresses that we face every day as South Africans, does it make sense to take money offshore at any cost and at any valuation? Or is there value to be found in the rand and on the local market?

We covered topics including:

  • Why local vs. offshore is such an important (and emotive) topic for South Africans.
  • Has the rand really been as bad as people think?
  • The extent of offshore exposure that can already be obtained through investing on the JSE.
  • The attractiveness of local yields.
  • The importance of valuation in any assessment, as things aren’t usually as good or as bad as they seem.
  • The recovery of China and the impact this has on local commodity players and luxury businesses.
  • Is “home bias” an issue for South Africans, or do we ironically suffer from the reverse?
  • The volatility paradox and how rand volatility interacts with volatility of other asset classes in investment funds.
  • The value of letting data drive our decisions.

For more from the Satrix – Ghost Mail partnership, visit this link to find various podcasts and articles.

Ghost Bites (Grindrod Shipping | Kibo Energy | Kore Potash | Life Healthcare | MC Mining | Orion Minerals | Renergen | Royal Bafokeng Platinum | Steinhoff)

The Finance Ghost
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Ghost Bites (Grindrod Shipping | Kibo Energy | Kore Potash | Life Healthcare | MC Mining | Orion Minerals | Renergen | Royal Bafokeng Platinum | Steinhoff)

Grindrod Shipping reduces debt through ship sales (JSE: GSH)

In such a cyclical industry, timing is everything

With things having slowed down in the shipping industry and interest rates on the rise, it made sense for Grindrod Shipping to sell off some ships and reduce debt with the net proceeds.

There were four such sales in March and April, with total net proceeds of $26.6 million. The cash was used to reduce senior secured debt in the group.

Kibo Energy is a good example of dilution in action (JSE: KBO)

Always look out for convertible instruments

When a company has issued warrants or convertible debt, there is risk of dilution for ordinary shareholders.

A warrant is just a type of option, allowing the holder to exercise the right to receive shares directly from the company (i.e. new shares) for a pre-determined price. Warrants can be used as part of start-up capital raising to create an equity kicker for early-stage investors to get them across the line.

A convertible loan does what it says on the tin: this is a debt instrument that can be converted into equity (shares) at the option of the holder.

The latest announcement dealing with equity conversions is a reminder that Kibo has dilutive structures in place, something that investors should be aware of when investing.

Kore Potash quarterly review (JSE: KP2)

This is a useful summary of progress at the Kola Project

The focus is still on finalising the terms of the Engineering, Procurement and Construction (EPC) contract. Kore Potash’s counterparties to this contract are PowerChina and SEPCO, who are working on guarantees to support the EPC contract.

Importantly, Summit Consortium has confirmed that the financing proposal for Kola will be provided within six weeks of the EPC terms.

As at 31 March, the company had $3.8 million in cash.

Life Healthcare: enough volatility to send you to the ER (JSE: LHC)

Here’s a lesson in investing in “safe” assets, like hospital groups

Life Healthcare is currently weighing up its options to sell its offshore business, Alliance Medical Group. Unsolicited proposals were received that the board can’t ignore, driving a need to engage with the potential offerors.

The company has renewed its cautionary announcement in this regard. Caution indeed, as just a cursory glance at this share price chart will reveal:

Fully licensed and shovel ready (JSE: MCZ)

MC Mining updated the market on the Makhado project

In MC Mining’s case, the shovels would be building the project rather than taking hard coking coal out of the ground. The good news is that an estimated 650 permanent jobs are expected to be created at full production. A detailed execution plan for the next five years has been put together based on the bankable feasibility study for Makhado and a great deal of subsequent work.

Various tender processes for contractors are underway and are expected to be concluded in the third quarter. Funding arrangements are expected to be concluded at around the same time.

It’s a long process, even once a project is “fully licensed and shovel ready” as the company puts it.

Orion Minerals reflects on the past quarter (JSE: ORN)

Copper and zinc prices are volatile as always, but the outlook remains strong

So-called “junior” mining companies are risky things. While they are running around trying to piece together funding for projects, metal prices can change and so can sentiment. It helps when there is a solid long-term story, as is the case with a metal like copper.

The past quarter was critical for Orion, with Clover Alloys coming in as the cornerstone equity investor. Together with other equity investors, this puts the company in a position to access the Triple Flag Precious Metals ($87 million) and IDC facilities (R250 million).

Scalable dewatering of the underground operations is set to start this quarter.

Renergen’s trading statement isn’t important (JSE: REN)

The share price isn’t being driven by current financial results

With Renergen having been firmly in development phase, the current financial results don’t tell you much about the long-term prospects or what the share price should be doing.

Still, I should mention that a trading statement has indicated a headline loss per share of between -22.6 cents and -17.1 cents for the year ended February 2023. That’s an improvement on the prior year of between 18% and 38%.

The royal saga continues (JSE: RBP | JSE: IMP)

Although Northam Platinum pulled its offer, the TRP complaints are unresolved

I’m tired of reading about this deal, so I can only imagine how tired those involved are. The management team at Royal Bafokeng Platinum is particularly gatvol, with the company having been under offer for over 18 months. Operating in a tough environment with that level of uncertainty really isn’t easy, something we are starting to see in the numbers.

Northam Platinum is no longer interested in making an offer to shareholders. This doesn’t mean that the saga is over, as a Takeover Regulation Panel (TRP) Compliance Certificate cannot be issued until complaints are resolved. A couple of complaints are causing major headaches, with the company trying to resolve them.

For example, there is a fight underway around the accelerated vesting and issuance of shares to the CEO and COO who announced their retirements. They were then given contracts to stick around until the corporate action is concluded. Northam Platinum believes that this is a “frustrating action” under Takeover Law and the matter has gone as far as the High Court. The problem is that the High Court process has the potential to really drag on, which would then delay the issuance of a compliance certificate by the TRP. Royal Bafokeng is considering other steps that would resolve this matter.

There were other issues as well. Northam Platinum made a complaint about the independence of the Royal Bafokeng directors, with that complaint dismissed by the TRP and then the Takeover Special Committee (TSC) in the appeal process. There were also concerns around the level of disclosure by the valuation independent expert in terms of valuation ranges. This was subsequently resolved, although the ranges are now so out of date that they are actually pointless.

Meanwhile, Impala Platinum has extended the longstop date to 31 May. The language in that company’s announcement is starting to sound very frustrated and impatient.

Somehow, I don’t think that Northam Platinum is on the Christmas card list for either Implats or Royal Bafokeng.

Steinhoff: worthless, but willing to share (JSE: SNH)

The speculative punts on this share price continue

Steinhoff closed 20.8% higher on Wednesday. You may be mistaken for thinking that there’s a good reason for this.

Instead, there’s just the usual activity in this share price of speculators playing a game of musical chairs. When the music stops, those who didn’t get out with a profit will be left as the proud owners of unlisted instruments in a worthless company.

In case you think that this is just me being painful about Steinhoff, here’s the company literally telling you that there is no value:

In simple terms, the company is worthless and hence creditors didn’t mind making space for shareholders to receive 20% of nothing. Ask yourself this: if there was any value here at all, why would creditors give some of it up after shareholders voted against the restructuring plan?

Little Bites:

  • As part of significant changes to its board, Grand Parade Investments (JSE: GPL) has also announced the appointment of a new chairman.
  • The CFO of AECI (JSE: AFE) has resigned for personal reasons. An internal promotion has been made on an interim basis.
  • The delisting of Jasco Electronics (JSE: JSC) was approved almost unanimously by shareholders at a general meeting.
  • Oando PLC (JSE: OAO) looks set for an offer and delisting process. In case you’re interested, the company released a very long announcement about taking delivery of electric buses (a perfect example of SENS being used as a public relations platform) and also released financials for the year ended December 2021, so it has nearly caught up.
  • Efora Energy (JSE: EEL) has been suspended for a long time. The company seems to be making some progress in addressing the backlog of financial reporting, but there’s still a long way to go in finishing audits etc.

Who’s doing what this week in the South African M&A space?

Vanessa Aitken
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Who’s doing what this week in the South African M&A space?

Exchange-Listed Companies

Capital Appreciation has acquired 100% of Dariel Solutions, the holding company of Dariel Software. The R131,2 million purchase price will be settled through cash (R85,3m) and Capital Appreciation shares (25,243,779 shares at R1,52 each, totalling R38,4m).                                  

Unlisted Companies

The UK’s Card Factory, has acquired 100% of SA Greetings Corporation for £2,5m in cash. SA Greetings is a wholesaler of greeting cards and gift packaging. It operates 24 “Cardies” stores and owns a roll-wrap production facility.

Convergence Partners has acquired a stake in 42Markets, a financial and capital markets fintech investment group, for US$10 million. The investment was made through the recently closed, US$296 million, Convergence Partners Digital Infrastructure Fund. The capital will be used to speed up the development and expansion of its portfolio companies (Mesh, Andile and FXFlow).

Consumer rewards app, Maholla, has raised US$1,5 million in seed funding. Investors include the Buffet Group, Castleton Capital, Praesidium Capital Management and Galloprovincialis. Moholla’s app rewards users for scanning any receipt from any store. It then links the retail-agnostic shopping data to the consumer and provides a real-time understanding of what consumers are purchasing in SA.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Weekly corporate finance activity by SA exchange-listed companies

Vanessa Aitken
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Weekly corporate finance activity by SA exchange-listed companies

The PBT special dividend of 75 cents per share (a total gross distribution of R156,9 million) has been approved and will be paid on 15 May.

Distell and Heineken have announced that all the scheme conditions have been completed and Distell will delist from the JSE on 28 April.

Kibo Energy issued a total of 794,893,911 new shares following a warrant conversion and convertible note conversion. 284,524,625 shares were issued for the warrants and 510,369,286 shares issued for the convertible loan note conversion.

The Jasco Electronics shareholders have approved the delisting resolution and the offer has become unconditional. The finalisation date announcement is expected to be released in early May.

The Kal Group (previously Kaap Agri) will repurchase and delist 247,843 shares following the release of the odd-lot offer results.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 17 to 21 April, a further 2,651,096 Prosus shares were repurchased for an aggregate €185,26 million and a further 566,392 Naspers shares for a total consideration of R1,9 billion.

Two companies issued profit warnings this week: Coronation Fund Managers and Renergen.

Three companies issued or withdrew cautionary notices: Trustco, Life Healthcare and Afristrat Investment.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com

Who did what this week across the African continent?

DealMakers
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Who did what this week across the African continent?

Smile Identity has acquired Inclusive Innovations, the parent company of a Ghanaian identity verification software developer, Appruve. Financial terms were not disclosed. The acquisition strengthens Smile Identity’s presence in Ghana and also aids it’s expansion into francophone Africa, focusing on Côte d’Ivoire and Senegal.

InfraCo Africa, part of the Private Infrastructure Development Group, has invested US$1,5 million in Uganda’s Afresco. The investment will support Afresco’s ‘Energy-as-a-Service’ offering to Commercial & Industrial clients in Uganda, Malawi and the DRC.

The UAE’s Ignite Power has acquired the solar solutions portfolio in Kenya of Mwezi Limited. The company did not disclose any financial terms. The acquisition will expand Ignite’s presence in the East Africa country.

DealMakers AFRICA is the Continent’s M&A publication.

www.dealmakersafrica.com

Competition law developments in Africa

Lesley Morphet
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Competition law developments in Africa

2022 was another busy year for competition regulators across Africa.

One aspect driving this activity arises from the introduction of the Africa Continental Free Trade Area (AfCFTA) Agreement. The AfCFTA has, as its primary objective, the creation of a single market for goods and services across the African continent. Before it can function, protocols need to be put in place, one of them being a Competition Policy Protocol, the provisions of which require the existence of a functional competition regime.

A draft Protocol has been developed in terms of Phase II of the AfCFTA Agreement, and was approved in October 2022. Pursuant to this, Rwanda has launched a project to align the national legal framework with the Competition Policy Protocol, and Ghana has delayed the submission of its Competition and Fair Trade Practices Bill to Parliament in order to ensure that the Bill is in alignment with the draft Protocol.

Many countries in Africa have existing competition legislation, and the diminishing number of countries without a competition law are taking steps to introduce such legislation. For example, Uganda, which for many years has been considering the introduction of a competition law, moved a step closer to this in 2022, with a bill having been submitted to Parliament for debate and consideration. Lesotho is considering the introduction of competition law. Burundi is also being assisted by the East African Community (EAC) to set up its competition authority.

Existing regulators are becoming more active. One of these is Mozambique, which in 2022 imposed its first administrative penalty for failure to notify a merger. The authority has identified market studies and restrictive practices investigations as key areas to be prioritised. It has also made provision for the electronic submission of merger notifications and complaints.

Nigeria is also making its mark in the field of competition and consumer law since its legislation came into force a few years ago. With respect to all aspects of competition law, Kenya has been very active for a number of years, particularly under the stewardship of Francis Kariuki, who was appointed Director General of the Competition Authority of Kenya in 2013. His term came to an end last month, and an acting Director General has been appointed. It will be interesting to see how the authority develops under new leadership. Egypt, too, is being proactive where mergers are concerned. Until now, it had a post-merger notification regime which had no powers to assess, approve or block a transaction, but they have now introduced legislation moving to a suspensory regime with penalties for gun-jumping.

Kenya, Nigeria and Egypt, along with South Africa and Mauritius, are proactively looking at digital markets and the implication for competition, an area which is seen by regulators globally as being of great importance. Following a workshop on “Digital Economy and Competition in the African Region”, hosted by the ECA in October 2021, an Africa Heads of Competition Dialogue was held in South Africa in February 2022, involving representatives from these countries. The Dialogue was convened to discuss the development of an African response to digital markets.

South Africa has taken the lead in development in this area, with the South African Competition Commission (SACC) having launched a market inquiry into online intermediation platforms in 2020. It released an interim report towards the end of 2022, and is due to release its final report in February 2023. From a competition law perspective, South Africa is still the most active jurisdiction across all areas, and from a merger perspective, the competition authorities are emphasising the importance of public interest considerations. In the past, their focus in this regard has been on employment aspects, but more recently, pursuant to an amendment to the law, this has expanded to include considerations of ownership, particularly by historically disadvantaged persons and workers. This focus on public interest also appears to be gaining traction in other jurisdictions on the continent.

Regional regulators are also active. The EAC recently passed an amendment bill aimed at granting the EAC competition authority the power to set the criteria for approving mergers or acquisitions.

The Common Market for Eastern and Southern Africa (COMESA) is a very active regional authority, both from a merger and a prohibited practice perspective, and it has also weighed in on the topic of digital markets. In March 2022, it issued a press release regarding Digital Finance Services, noting that they have been undertaking a number of activities aimed at promoting fair digital markets, and have prepared Guidelines for e-Commerce.

This active trend looks set to continue in 2023, and parties with activities in Africa should continue to ensure that they are compliant with the various existing and impending competition laws on the continent.

Morphet is a Partner | Fasken

This article first appeared in DealMakers AFRICA.

DealMakers AFRICA is the continent’s quarterly corporate finance publication.

www.dealmakersafrica.com

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