FirstRand released a trading statement for the year ending June 2022 which gives the bare minimum disclosure: earnings will be at least 20% higher than the prior period. There’s a lot of attention on the banks at the moment, which is why I wrote a feature article on the drivers of banking earnings this year.
The Takeover Regulation Panel (TRP) has issued a really important ruling on the Tongaat Hulett situation, in which Magister Investments would’ve obtained a large stake in the company by underwriting a rather desperate rights offer. After a complaint by the Artemis consortium, the TRP investigated and found that certain third party share transactions rendered the waiver of the mandatory offer a nullity. In English, this means that Magister’s exemption from making a mandatory offer if it goes above a 35% shareholding has fallen away, so the company would need to be in a position to acquire the entire company rather than just a significant minority holding. Importantly, nobody at Tongaat Hulett has been implicated in this. It is simply a technical legal matter. The effect is significant though, as this waiver was a condition precedent to the Magister deal. The reality is that Tongaat needs to raise money to fix the balance sheet. If it isn’t going to come from Magister, they need to find an alternative very quickly.
Heriot REIT has announced a firm intention to make a general offer to Safari Investments RSA shareholders. This has been a long time coming (and Heriot even cleared this with the Competition Commission earlier this year), as Heriot and its concert parties (including Reya Gold Investments) already held 33.1% in Safari. A general offer will be made to Safari shareholders at R5.60 per share. Heriot also notes that it won’t support any move by Safari to make acquisitions or issue new shares, as Safari is trading at a significant discount to net asset value. This may sound like corporate bullying to get shareholders to accept the offer, but it does make sense. Safari’s share price increased by 7.3% on Friday as the share traded up to the offer price and the arbitrage trade closed (otherwise people would just buy the shares at a lower price and accept the offer to lock in a risk-free profit, known as an arbitrage). Safari’s net asset value per share at the end of September 2021 was R8.21.
Alphamin’s share price closed nearly 4.8% higher on Friday after announcing a 46% increase in the Mpama South inferred mineral resource estimate. The existing development of that resource will increase Alphamin’s tin production to around 6.6% of the global total, from the current level of 4%. With the latest announcement, the long-term prospects of the site are even more interesting than previously thought.
There’s been more insider buying at Raubex, with the construction group closing slightly higher on Friday and down around 2.5% this year.
Many companies and business leaders have expressed sadness at the passing of Meyer Kahn, a distinguished executive who served on numerous listed company boards, including as group managing director of SABMiller. He co-founded Afrocentric Investment Corporation in 2006. Interestingly, Kahn served as CEO of the South African Police Service from 1997 to 1999.
In a very impressive show of support from shareholders, the proposed Purple Group share incentive plan received 99.91% approval. This is particularly good when you consider that many companies are currently struggling to get strong approval for remuneration by shareholders.
The relationship between Oceana Group and its previous CFO Hajra Karrim has come to an end. Karrim was suspended on a precautionary basis pending a further process. The contract of employment has now been terminated based on findings of gross misconduct against Karrim. The share price has shrugged off the executive turmoil and auditor resignation this year, down just 2.8% in 2022.
Allan Gray has acquired more shares in Tiger Brands, taking the holding above the 10% threshold. They clearly see something in the company that I don’t. Allan Gray has also sold down its stake in Nedbank and fallen below the 10% threshold, a decision that I also don’t particularly understand.
An independent non-executive director of AngloGold has bought shares in the company worth just over $51,000.
An independent non-executive director of Stefanutti Stocks has bought shares in the company worth R467,500 – a significant show of faith in a business that is facing tough times.
Local banks have been one of the best sectors that you could’ve chosen this year. Only Capitec has been a disappointment, coming off an incredibly high valuation. The other four large banks have all posted great returns, especially measured against the the broader market.
What is it about this environment that is driving strong returns for banks?
The latest update in the banking sector is a trading statement from FirstRand, one of the best financial institutions in the country.
The update relates to the year ending June 2022, so FirstRand is feeling confident enough to comment on a period that only ends a month from now. This positive messaging is why the share price closed 4.7% higher on Friday.
JSE rules require companies to release a trading statement when there is a reasonable degree of certainty that earnings will differ by at least 20% to the comparable period. It’s quite rare to see a company release a trading statement before the period has ended.
Importantly, all that FirstRand has confirmed at this time is that earnings will be at least 20% higher, so that’s the bare minimum under JSE rules. This makes it plausible (and perhaps even likely) that the end result will be even better.
The market clings onto every word in these types of announcements, looking for clues in the commentary as to the drivers of performance.
FirstRand notes that “the credit cycle in South Africa is incrementally gaining impetus” – a sentence that appears to have been designed to deliberately confuse almost anyone reading it. If you understand banking, you’ll know that this talks to the overall credit environment, which is a function of demand for credit and customer affordability that keeps credit losses at reasonable levels.
The update confirms that impairments are reducing and non-performing loan (NPL) “formation” is in line with expectations. Remember, when a bank lends money, it knows that a percentage of those loans will end up in trouble. This is a cost of doing business for a bank.
The perfect scenario for banks is one in which people want credit, they can afford it and rates are going up as this makes the credit more expensive. This environment drives growth in loans and advances and improvements in the net interest margin, a combination that turbocharges banking earnings.
Nedbank’s update last week gave the impression of strong growth in consumer credit and subdued demand for credit from corporate clients i.e. large companies. This is particularly interesting considering the pressure that corporate balance sheets are being put under by working capital stresses and inflation. In contrast, the FirstRand update noted that corporate activity is “showing stronger momentum” – a more positive narrative.
The FirstRand update gives a passing mention to the UK business, where “advances growth has continued” as demand for credit picks up. I’m more focused on the South African environment.
The chart below shows the year-to-date performance for the five largest banks, clearly demonstrating the momentum in this sector:
Nedbank is the star of the show here, which may come as a surprise to you. This is a wonderful lesson in buying the cheaper companies in a particular investment theme, especially where relative valuations have deviated over time.
This is also why Capitec has lagged peers this year, as it was trading on the highest valuation multiples coming into 2022.
Will the momentum continue?It’s impossible to say for sure, of course. Something heavily in the banks’ favour is that rates are rising off a low base, which means every increase has a significant positive impact on earnings. When rates get too high, an increase can have a negative impact because of credit losses. For now, things in the sector are shining bright green.
The Capital Appreciation Group (Caprec) investor presentation shouts it from the rooftops on one of theearly slides: “The Covid Accelerant: Everything Digital” – I think that sums it up rather well. Caprec is swimming in the right streams by focusing on verticals like payments and software.
And unlike US-based tech stocks that benefitted from the same trends, investors have been able to buy shares in Caprec at far more modest multiples. This is a good thing, obviously, with the local company keeping its eye firmly on the prize in its chosen verticals.
There are now over 277,000 payment terminals in the hands of clients, having grown at a compound annual growth rate (CAGR) of 41% since 2017. The group believes that there is a market opportunity of more than 800,000 payment acceptance devices just in South Africa, let alone the rest of Africa. The group is delivering other innovations around payments, ranging from smartphone solutions through to a lay-by platform (a major global trend).
The Synthesis software and cloud business was awarded the Partner of the Year 2021 (Sub Saharan Africa) by Amazon Web Services, which is a major achievement. The business contracted R300 million in new business and concluded the acquisition of Responsive Group.
Internationally, Caprec has invesed in Regal Digital and launched new offices in Amsterdam.
Turning to the financials for the year ended March, terminal sales were up 54% and software revenue increased by 34%. International income was up 33%. EBITDA margin improved from 27.9% to 30.3% despite headcount increasing by 24%.
These are great numbers that culminated in headline earnings per share (HEPS) up 30% to 13.40 cents and dividends per share up 36% to 7.50 cents.
Interestingly, Caprec’s GovChat platform has been at the centre of a dispute with Meta (Facebook), after the latter tried to remove GovChat from its platforms. GovChat complained to the Competition Tribunal and the Competition Commission was asked to investigate. The Commission has recommended that a fine of 10% of Meta’s South African revenues be levied for this!
GovChat continues to be on the platforms. This is the business that raises a few eyebrows, with a cumulative loss in the past two years of over R25 million.
Capital Appreciation Group has grown its dividend every year since 2018 and has paid 26.25 cents per share in cumulative dividends over that period. The share price closed at R1.84, taking the year-to-date performance to 3.4%.
Gold Fields has announced an all share offer to acquire Canada-based miner Yamana Gold. The share-for-share exchange transaction, with an exchange ratio of 0.6 Gold Fields consideration shares for each Yamana share, values Yamana Gold at c. US$6,7 billion (R103 billion). The market reacted sharply to the deal and its dilutive nature, with the share price tanking 23%. It may be worth remembering that in 2016 Sibanye Gold acquired US Stillwater Mining for R30 billion and at the time Sibanye’s market capitalisation was R26 billion – a case of the minnow swallowing the whale. Gold Fields’ market capitalisation on the other hand was R170 billion on the day prior to the announcement of its proposed R103 billion deal. Gold Fields shareholders will own 61% and Yamana shareholders 39%. The combined group will be headquartered in Johannesburg with operations across Canada, Australia, South America, Ghana and South Africa, creating a diversified top-4 gold global major.
Naspers’ venture capital unit Naspers Foundry has invested R40 million in fintech startup LifeCheq. The startup uses artificial intelligence to lower the cost of financial advice previously accessible only to higher-income earners. This marks the fifth fintech investment and its 11th technology-based transaction.
Huge Telecom, a subsidiary of Huge Group, has concluded an agreement to acquire the remaining 49.97% interest in Huge Networks from Otel Communications for a purchase consideration of R15 million. In addition, Huge acquired a 5% stake in Glovent Solutions, a company specialising in innovative system design and development for R3 million.
Kibo Energy is to take a 51% stake in National Broadband Solutions (NBS), following a deal with Hasta Trust. NBS holds a portfolio of long duration energy storage projects with an initial target of c.36,320 MWh capacity. In exchange for the stake, Kibo will grant NBS access to its strategic capabilities and capacity in respect of long duration storage solutions for specific market sectors covered by NBS’ project portfolio.
Capital & Counties Properties plc is in talks with Shaftesbury plc on a possible all-share merger. Capco has until June 17 to announce a firm intention to make an offer or announce it does not intend to do so as per the regulatory laws governing such actions in the UK.
Libstar announced in February 2021 the sale of a 70% stake in its household and personal care businesses for R174,6 million to PAPE Fund Managers and Kanaka Chemicals following an offer from the acquirers. This week the company advised that although the businesses had delivered improved an operating profit result despite the volatility of the current economic environment the parties had been unable to conclude the definite agreements relating to the transaction.
Unlisted Companies
Wasaa, the Johannesburg-based, black women-owned petrochemicals company has acquired the East London liquid fuel import terminal from BP Southern Africa (bpSA). The deal, the financial details of which were undisclosed, sees Wasaa Terminals take full operational control of the terminal, the movable assets and a 20% stake in the berth to terminal pipeline. bpSA has retained operation of its transport business.
Enko Education, a network of African international schools headquartered in Johannesburg, has closed its US$5,8 million series B round led by Adiwale Partners with participation from the Steyn Capital family office among others. Funds will be used to increase the number of students in the network.
West Wits Mining, which is listed on the ASX, is to increase its ownership in the Witwatersrand Basin Project to 74% with the acquisition of a 7.4% stake from Lilitha Resources, its BEE partner for US$50,000 in cash and 96 million West Wits Mining shares.
South African international calling app startup, Talk360, has secured US$4 million in funding led by HAVAIC with participation from Cape-based 4Di Capital and angel investors. Funds will be used to launch a new pan-African payment platform that will integrate all available payment options across Africa and to expand its international calling operations across the continent.
Local e-commerce platform Shopstar has secured an undisclosed sum in its third-round funding from Launch Africa Ventures, a pan-African fund headquartered in Mauritius. The platform enables local entrepreneurs to build online stores and grow businesses by offering easy to use professional services. The funds will be used to scale its platform.
Incofin Investment Management, the Belgian-headquartered international impact investment company, has disposed its 20% stake in ACEP Burkina (held through Incofin CVSO, a cooperative investment fund open to small investors) to French impact investor, Solidarité Internationale pour le Développement et l’Investissement (SIDI). ACEP is the second largest microfinance institution in Burkina Faso by portfolio size and offers a broad range of financial solutions to SMEs, institutions and high net-worth individuals.
Kansai Paint Co, a Japanese, Osaka-based chemical company, is to sell its African operations to Dutch multinational paints and coatings company AkzoNobel. Kansai Paint which has a footprint in 12 African countries will receive US$450 million for the sale of assets.
Cairo-based Appetito, the Egyptian grocery and household products delivery service, is to acquire Lamma, a Tunisian on-demand delivery business with a presence in Tunisia and Morocco. The financial details of the deal are undisclosed.
African-focused fintech platform Finclusion Group has received an equity investment from The Cairo Angels Syndicate Fund, a micro venture fund investing in early-stage startups in the Middle East and Africa.
BURN Manufacturing, a Kenyan manufacturing company specialising in the design and manufacture of biomass, electric and LPG cookstoves, has, via a long-term quasi-equity instrument received US$4 million. The investment by Spark+ Africa Fund will enable BURN to increase the capacity of its manufacturing facility in Nairobi and finance the expansion of its business in new markets including Somalia, Ghana, Nigeria, Mozambique and the DRC.
Nigerian mobility technology company DriveMe has raised an undisclosed sum in a pre-seed funding round which will aid its local expansion and product development. The platform sources drivers, verifies their credentials and pairs them with vehicle owners and fleet operators.
Enko Education, a network of African international schools headquartered in South Africa, has closed its US$5,8 million series B round led by Adiwale Partners with participation from the Steyn Capital family office among others. Funds will be used to increase the number of students in the network.
Natrify, an Egypt-based biotechnology startup, has raised a six figure pre-Seed round to further its product development. Natrify offers a sustainable and biodegradable alternative to single-use plastic, having recently developed Adigide, a plastic that is biodegradable in many environments. The investment was raised from Ambo Ventures, a venture capital fund focused on investing in impact-driven and socially responsible African startups.
Betastore, the Nigerian-based B2B startup, has raised US$2,5 million in a pre-Series A funding round led by 500 Global, VestedWorld and Loyal VC. The funds will be used to scale the business into Ghana, the DRC and Cameroon by year-end. The retail marketplace enables informal traders to source fast-moving consumer goods directly from the manufacturer/distributor thereby keeping costs competitive.
Egypt-based on-demand delivery startup Gooo Delivery has raised an undisclosed amount in a pre-seed round. The startup offers point-to-point delivery services via the use of an app which enables users to order a range of goods in several cities across Egypt. Funds will be used to scale the business.
BHP has paid its shareholders an in specie dividend in the form of Woodside Petroleum shares in connection with the merger of its oil and gas portfolio with Woodside. 914,768,948 Woodside ordinary shares received as part of the merger have been distributed to BHP shareholders valued at US$19,6 billion.
Equites Property Fund has issued a total of 1,421,922 new company shares in terms of its scrip distribution alternative, retaining R28,16 million in new equity. The company’s total issued share capital now consists of 777,995,297ordinary shares.
Isa Holdings is to pay shareholders a special dividend of 10 cents per share totalling an aggregate of R17,1 million.
Data specialist PBT Group is to distribute 30 cents per share in the form of a special dividend for a total distribution of R31,8 million.
AngloGold Ashanti is the latest listed corporate to take a secondary listing on A2X Markets. The company will retain its listings on the JSE, NYSE, ASX and the Ghana Stock Exchange. The shares will be available to trade on the A2X platform from June 6, 2022.
A number of companies listed on one of South Africa’s Stock Exchanges have initiated share buyback programmes and each week update shareholders. They are:
Barloworld is to buy back up to 10% of its issued ordinary share capital through a repurchase programme on the open market.
Glencore this week repurchased 6,200,000 shares for a total consideration of £32,6 million in terms of its existing buyback programme which is expected to end in August 2022.
South32 this week repurchased 1,335,716 shares for an aggregate cost of A$6,41 million.
This week British American Tobacco repurchased 1,964,000 shares for a total of £69,56 million. The purchased shares will be held in treasury with the number of shares permitted to be repurchased set at 229,400,000.
This week three companies issued profit warnings. The companies were: African Equity Empowerment Investments, Imbalie Beauty and Mantengu Mining.
Four companies issued cautionary notices to shareholders this week. The companies were: PSV, Tongaat Hulett, FirstRand and Tradehold.
Negotiating the most beneficial price is a key consideration when business owners want to sell their shares. However, in reality, “ancillary matters” often creep up on the parties and serve to delay or frustrate matters, with an obvious impact on the price that the owner was hoping to get. Let’s consider some of these, together with their impact and, notably, their tax effect.
The elephant in the room is often regulation. For instance, the Companies Act holds that a seller may not dispose or give effect to an agreement to dispose of all or the greater part of its assets or undertakings unless the Takeover Regulation Panel has issued a compliance certificate or exempted the transaction.
It is, therefore, important to determine whether the company in which the shares are held is a “regulated company”. This would most likely be the case where 10% or more of the issued securities of the company have been transferred (other than by transfer between or among related or inter-related persons) within the period of 24 months immediately before the date of a particular transaction or offer. Should such transfers have occurred, the seller will be regarded as a “regulated company” that is entering into an “affected transaction” which would be subject to TRP approval.
Competition authority approval is another crucial aspect. In this regard, you would need to establish whether there will be an acquisition or establishment of control over the whole or part of the business of the company, as contemplated in the Competition Act. Should that be the case, you will need to consider the thresholds and categories of mergers to determine whether approval from the Competition Authorities is required. There is a useful basic merger threshold calculator on the Competition Commission’s website.
Another key consideration is, if the Seller has a properly drafted MOI, there will usually be a pre-emptive right in favour of the other shareholders contained in the MOI, or at least an article that provides that any shareholder to whom a transferor wants to transfer shares must be approved by the other shareholders. It is important to adequately deal with any such pre-emptive rights in your transaction documents as part of the conditions precedent.
Tax Considerations Proper record keeping of historic transactions is vitally important as you would use those records to determine whether the current transaction will (a) be subject to capital gains or income tax by assessing the nature and period of the shares held or (b) give rise to any onerous claw-back provisions should group reorganisation transactions have been entered into in the recent past.
Furthermore, historic and envisaged dividends would also need to be considered. This is because of the dividend stripping provisions contained in the Income Tax Act, which could potentially give rise to increased capital gains tax exposure for the current transaction should “exempt extraordinary dividends” have been declared in relation to the shares being sold.
Certain transactions also have reporting requirements from an income tax perspective. In this regard, the regulations published on “Reportable Arrangements” needs to be considered. The most notable we have seen recently being:
*An arrangement in terms of which a company buys back shares for an aggregate amount exceeding R10m, and that company issued or is required to issue any shares within 12 months of entering into that arrangement, or of the date of any buy-back in terms of that arrangement. *An arrangement in terms of which one or more persons acquire the controlling interest in a company that has an assessed loss exceeding R50m.
Should the acquiring party in a particular transaction not be a South African Reserve Bank Resident, or should the transaction be funded with offshore loans, it must be noted that the transaction or loan funding should be placed on record with the South African Reserve Bank.
Further considerations that may also be important are:
*Whether the seller has ceded the shares as security. A well-drafted cession as security agreement will likely require the written consent of the cessionary before the shares can be transferred. *If the seller is bound as surety or guarantor for the due and proper performance of the Company. If this is the case, ensure that the applicable clauses relating to the release or indemnification of the Seller be included in the Agreement. *Industry specific regulations (for example in the mining sector).
Getting a Sale Over the Finish Line So, in a nutshell, the purchase consideration, albeit potentially the most vital aspect for any transaction, is not the only aspect to be considered should you wish to get the transaction over the finish line in a timeous fashion. It is, therefore, important to ensure all regulatory and legal aspects are considered and accounted for in any potential deal timeline.
Bobby Wessels is an associate and specialist tax and transaction advisor | AJM Tax Attorneys.
This article first appeared in DealMakers, SA’s quarterly M&A publication
Capital Appreciation Group is a fascinating tech company. It was the first special purpose acquisition company (SPAC) ever listed on the JSE and has gone from strength to strength. In the year ended March 2022, revenue jumped by 34.1% and EBITDA increased by 45.5% with an EBITDA margin of 30.3%. Headline earnings per share (HEPS) increased by 29.6% to 13.40 cents and the annual dividend was 7.50 cents. For more details on this exciting business, read this feature article.
Harmony Gold has at least added some much-needed positive news to the gold sector narrative this week. The first phase of Harmony’s renewable energy journey is a 30MW solar energy plant in the Free State. Phase 2 is a lot more exciting, with 137MW across various longer-life mines. By FY25 when Phase 2 is fully operational, Harmony anticipates R500 million in annual cost savings. Phase 1 is where the action currently is, with three plants being built in a deal with various technical and funding partners. Beyond the obvious benefit of cost savings and emissions reductions, these projects unlock “green funding” from banks. In a syndication led by Absa and Nedbank, Harmony has raised a R1.5 billion term loan (ring-fenced for Phase 2) and sustainability-linked loans consisting of a R2.5 billion revolving credit facility, a $300 million revolving credit facility and a $100 million term loan. The sustainability-linked loans have KPIs related to emissions, energy consumption and potable water consumption. If Harmony meets the targets, the interest rate drops. If it misses them, the rate rises. This is a really great example of how financial structures can be used to incentivise sustainable behaviour.
Oceana Group has released its interim results for the six months ended March 2022. Shareholders are desperate for some stability here, after wholesale executive management changes and the resignation of the auditors. Revenue fell by 11% and overheads increased by 7%, including a R42 million impact from legal and incremental audit costs related to the delay in the September 2021 year-end audit. Considering the insurance proceeds for a hurricane and the KZN riots were R63 million and R9 million respectively, accounting is practically a natural disaster. Operating profit fell by 37% and HEPS tanked by 51%. The good news is that the group still generated positive cash flow and net debt was reduced by 8%, for which shareholders will be thanking their Lucky Stars. A dividend of 55 cents per share has been declared as a result, half of last year’s interim dividend.
African Media Entertainment is highly illiquid and has a significant bid-offer spread, so the drop of 15% in the share price on thin volumes is a function of that. The company released results for the year ended March 2022, reflecting revenue up 25%, operating profit up 80% and HEPS coming in at 371.6 cents. A final dividend of 200 cents per share has been declared, taking the total for the year to 280 cents. The share price closed at R33.99.
If you are a shareholder in Datatec, the JSE-listed technology firm with extensive global reach, look out for a circular dealing with the cash vs. scrip dividend decision. A scrip dividend allows shareholders to reinvest the dividends (i.e. receive more shares) instead of cash dividends. There is usually an incentive given to choose the shares, in this case a 10% discount to the volume weighted average price (VWAP). The benefit to the company is that cash is retained for growth if shareholders elect the scrip dividend alternative.
Lewis Group has continued with its share buyback program that has been a great driver of shareholder returns. Since the general authority granted in October 2021, 9.9% of shares in issue have been repurchased, leaving just 0.1% left under that authority. The last 6.6% has been repurchased at an average price of R49.89, lower than the current share price of R51.00.
There have been some grumblings at the Mpact AGM, with special resolutions related to share repurchases, financial assistance to group companies and non-executive directors’ remuneration failing to pass. The financial assistance resolution passed in June 2021 lasts for two years, so the group is unaffected for now. Non-executive directors have agreed to serve without remuneration while shareholder consultations are conducted. Caxton voted against the resolutions, using its significant minority position to achieve this outcome. There have been noises around Caxton making an offer for the company or pushing for a merger, but that hasn’t happened yet. Minority shareholders in Mpact need to keep a careful eye on this.
Steinhoff Investment Holdings has released a trading statement. Many people get confused when it comes to this company, as there are two listed Steinhoff entities. This is JSE:SHFF and the instrument is a variable rate, cumulative, non-redeemable, non-participating preference share. If you think that’s a mouthful, I was once in a deal negotiation where people discussed such an instrument in Afrikaans. Trust me, THAT’S a mouthful. To be clear, this is a subsidiary of Steinhoff International Holdings (JSE:SNH) and the earnings aren’t reflective of group earnings.
Irongate Property Fund shareholders will be pleased to learn that the New Zealand Overseas Investment Office has consented to Charter Hall’s proposed acquisition of Irongate. This is just one condition out of a long list that needs to be met.
Brikor Limited has broken ground at the Grootfontein mine in Nigel, which lies adjacent to Brikor’s Ilangabi coal mine. The mine is expected to create 300 new jobs over the next five years and produce 50,000 tons per month with the potential to increase this further.
Many South African corporates have announced an update to credit rating outlooks from stable to positive. This is a result of an improvement in the sovereign position. Not many have received outright upgrades though, with Sappi Southern Africa announcing that Global Credit Ratings has revised the firm from AA(ZA) to AA+(ZA) with a positive outlook. The short-term rating has moved from a stable to positive outlook as well. Again, this is a measure of risk rather than potential equity gains, but is still a trend in the right direction.
Christo Wiese is known for using leveraged positions to turbocharge his wealth. I guess there’s no such thing as “enough” – which is why an entity in his group has rolled a single stock futures position on Shoprite Holdings worth nearly R425 million and added another R1.2 million of exposure to it for good measure.
Transaction Capital took some pain yesterday, presumably based on an announcement of directors (the group CFO and a director of a major subsidiary) selling shares that were received under a conditional share plan. By afternoon trade, it had recovered some of the losses to be 3.75% down.
Mantengu Mining is a company that you can easily be forgiven for not knowing anything about. The company is technically insolvent and just operated as a cash shell this year, with no revenue. The board is pursuing the acquisition of Langpan Mining Co and issued a circular on 30 May for this opportunity. This is effectively a reverse listing of assets into the cash shell. Although the latest news is that Mantengu has released financial results for the year ended February, they are almost pointless. Full focus is on the Langpan deal.
Just months into his role as Group CEO of the Primedia Group, Jonathan Procter, is making sure that growth is on the horizon for leading media mega-group Primedia.
When Jonathan Proctor was appointed as Group CEO in August 2021, the chair of the Primedia Group Board, Phumzile Langeni spoke of how Jonathan’s extensive media experience in Africa and Europe qualified him to lead the next stage of the Primedia Group’s growth strategy. Phumzile commented that Jonathan’s innovative outlook and his global insights on media would benefit the group.
With the appointment of top talent and the signing of a prestigious partnership, it appears as if the new CEO of the Primedia Group is living up to his promise.
Exciting Developments at Primedia
Randall Abrahams takes up top spot at Primedia Broadcasting
The airwaves have been abuzz, in recent weeks, with the appointment of Randall Abrahams as the new CEO of Primedia Broadcasting. The multi-talented Randall Abrahams, a broadcasting and music connoisseur, has an enviable track record in launching, transforming and successfully commercializing broadcasting and music platforms. He will be responsible for managing and growing 702 and 947 in Gauteng, as well as Cape Talk and KFM in the Western Cape and Eyewitness News (EWN), Primedia’s national news content service. (Read more here)
Clare O’Neil appointed Primedia Group COO
The appointment of one of the industry’s finest marketing and media doyennes, Clare O’Neil as COO of the Primedia Group has been widely applauded. She will coordinate Primedia’s operational growth through upscaling group synergies, directing group marketing and research strategies, and unpacking new innovative data initiatives. Clare has worked at SABC as general manager of TV sales and at eTV as the channel’s commercial sales director and is a well-regarded thought leader of marketing and media matters. (Read more here)
Prized partnership with Paramount
Primedia and Paramount have entered into a winning strategic partnership. This partnership brings together the powerful and popular mass mediums of television and radio. This powerhouse collaboration will unlock considerable and multiply audiences and commercial value for clients and partners. This game-changing collaboration is a significant step forward for Primedia and Paramount, as both brands continue to offer diverse content, a streaming model, mix of platforms and reach – all in response to the evolving, media consumption patterns of audiences. (Read more here)
Santam has released an update for the four months ended April 2022. Premiums are up, underwriting margins are down and investment returns have taken a knock. There’s much to learn about the insurance industry from this feature article.
Tradehold has concluded an agreement to sell its shareholding and claims in Moorgarth Holdings to Moorgarth Group Holdings, the holding company of all the interests in the UK. This is a related party deal worth GBP102.5 million. Major shareholders of Tradehold with a total stake of 67.2% in the company cannot vote on the deal, as they are also shareholders of the purchaser and are thus conflicted. The legal term is that a majority of “disinterested shareholders” need to approve the deal, which is a nod to their lack of conflict rather than their lack of concentration at the meeting. An independent expert has been hired to opine on the fairness of the transaction, which is particularly important as the sales price appears to be well below the value recognised in Tradehold’s books (GBP149 million).
Property fund Fairvest has released interim results for the six months ended March 2022. Due to the recent merger with Arrowhead, the comparability of the accounts with the prior period is severely impacted. Investors should note that Fairvest also holds a 61% stake in Indluplace Properties and an 8.6% interest in Dipula Income Fund. Fairvest has a dual-share structure and has declared dividends of 61.52 cents and 21.33 cents for the A and B shares respectively. This is a 4.3% yield on the A shares and a 6.5% yield on the B shares. The A shares are trading at a 4% discount to net asset value (NAV) per share and the B shares are trading at a 33% discount to NAV per share.
Labat Africa announced in December 2021 that it had signed a put option agreement that would allow it to raise R300 million in capital over the next 36 months from GR Global Ventures LLC, an investment group based in the US. There have been delays in implementing the deal as Labat navigates the JSE requirements for a deal like this. As soon as these hurdles are cleared, Labat wants to exercise the put option on between 14 million and 28 million shares, which means issuing those shares at the price in the option agreement – a premium of 120% to the current price. This would raise between R3.7 million and R7.4 million by my rough calculations. The proceeds will be used to expand the Sweetwaters operation in the Eastern Cape, part of the strategy for international offtake of pharmaceutical grade cannabis.
There’s an update from Ascendis. In stark contrast to the usual newsflow from the company, it’s a bit, well, normal? The sale of Amka Products (the Nimue business) has been implemented and the proceeds will reduce the debt owed to Austell Pharmaceuticals. Ascendis needs to distribute a circular to its shareholders regarding other transactions and was supposed to do so by 31 May 2022. With recent changes to the board and the lenders, this simply hasn’t been possible. The JSE has granted a dispensation and the circular is expected to be distributed by the end of June.
BHP Group has completed its merger with Woodside Energy Group. In this deal, BHP sold BHP Petroleum to Woodside and received shares in Woodside as payment. These shares are being distributed to shareholders in other jurisdictions, as Australian business Woodside will be listing in London as part of the deal. South African shareholders will be paid out in cash (BHP will sell the shares on behalf of local shareholders) unless they elected to receive the shares and followed the required process with the SARB. I remain annoyed that the enlarged Woodside business won’t be listing on the JSE.
Back in February, Libstar shareholders rejoiced at the news that an acquirer would be taking a controlling stake in the household and personal care business, leaving the group to focus on the food business. Sadly, the deal has fallen through. On the plus side, Libstar has highlighted that this segment delivered an improved operating result in the first four months of this financial year vs. the comparable period. Libstar is down more than 22% this year.
Mantengu Mining has released a trading statement for the year ended February 2022. The headline loss per share will be between 89.30 and 92.80 cents and I’m not sure that this is directly comparable to the prior year due to a significant restructure.
Investors in Purple Group will know that Mark Barnes has been a seller of the shares in recent times, which has been an ongoing awkward discussion point for the company as substantial growth is being promised. The latest update is that Barnes has sold R40.5 million worth of shares in Purple, with a note that he is “diversifying his personal portfolio” – which makes sense. The share price has been incredibly volatile this year and is down around 15% this year. It’s been a fun opportunity for traders, with a massive support level at around R2.30.
Spear REIT has withdrawn the ability for shareholders to choose to reinvest their dividends rather than receive the cash. This means that the Spear distribution will be paid out in cash.
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