Thursday, March 20, 2025
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Ghost Bites (MAS | Pick n Pay | Zeder)

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MAS looks to simplify the Prime Kapital joint venture (JSE: MSP)

In an interesting potential deal, MAS would become sole owner of the commercial properties and pipeline

MAS has been dealing with a really tough forecast around debt refinancing and the state of play in debt markets for sub-investment grade property funds in Eastern Europe. Credit to the management team: they haven’t stuck their heads in the sand on this one. Instead, they’ve been highly proactive in dealing with the problem, even if it wasn’t a popular decision for the share price.

Now, they are looking to simplify the joint venture structure with Prime Kapital. MAS owns 40% of the joint venture and Prime Kapital owns the rest. The proposal is for the joint venture to acquire Prime Kapital’s commercial development platform and interests in the joint venture, while disposing of the residential assets and residential development pipeline to Prime Kapital.

The net result is that the joint venture would be a wholly-owned subsidiary of MAS, focused on commercial properties and developments. When they say commercial, they mean what South Africans would typically refer to as retail properties i.e. malls. Local funds often say “commercial” in the context of office properties.

If they get this right, MAS believes that credit rating prospects would be improved thanks to having control of high quality assets with limited existing debt.


Pick n Pay declares its rights offer (JSE: PIK)

The market has known for months that this was coming

In perhaps the most well-telegraphed rights offer of all time, Pick n Pay has finally pulled the pin on the plan to raise R4 billion in equity to try and save the group. The GNU-phoria in the market and lack of load shedding has given Pick n Pay an unbelievable get-out-of-jail card that I sincerely hope management will have the humility to avoid taking credit for.

This share price rally has been driven by factors largely outside of their control, like the disappearance of load shedding in the second quarter and the recent rally in SA Inc stocks:

Still, all great turnaround stories need a bit of luck at some point, so hopefully Pick n Pay will make the most of this good fortune.

As has been noted previously, the plan is to raise the R4 billion in debt through a full underwritten, renounceable rights offer. This comes after a shocking trading loss of R1.5 billion in the year ended February 2024, along with a spike in the debt ratio from 1.1x EBITDA to an unacceptable 6.3x EBITDA. For reference, most companies operate in a range of 1x to 2x EBITDA.

The underwriters are the banks: Absa, RMB and Standard Bank. They are underwriting the raise equally. The banks don’t particularly want the shares, which is why excess applications are being allowed – a process through which shareholders can apply for additional shares beyond their pro-rata allocation.

Full details will be found in the rights offer circular that is scheduled for release on 22 July.

The ongoing sentiment improvement around South Africa is a gift for Pick n Pay beyond just the rights offer. They will also look to separately list Boxer and raise cash through that process. The valuation of Boxer will no doubt be much higher in the current environment than it would’ve been six months ago.


Zeder announces another farm disposal (JSE: ZED)

The value unlock has momentum

Hot on the heels of the Theewaterskloof Farm disposal announcement in June, Zeder has now announced the disposal of Applethwaite, one of the primary farming production units with Zeder Pome Investments, in which Zeder holds 87.1%.

The disposal price is R190 million plus the value of agricultural inputs on hand and 2025 seasonal costs already incurred. This won’t exceed the threshold for a Category 1 transaction, so they won’t need a circular or shareholder vote.

The purchase price will be settled on the day of transfer of the farm.

There are a couple of layers of separation here, as the farm is currently held within Capespan Agri, a 100% subsidiary of Zeder Pome. For the cash to flow all the way up to Zeder shareholders, both Capespan and Zeder Pome would need to approve the distributions. The board of Zeder itself would then need to declare a dividend. Thankfully, Zeder effectively controls the entire structure, so chances are very good that the cash will flow to the top. Assuming that happens, Zeder has noted an intention to distribute the majority of the cash to shareholders.

I didn’t see any mention in the announcement of the buyers needing to raise funding for the purchase, so there’s a good chance that the deal will go through. They expect conditions precedent to be fulfilled by the end of September 2024.


Little Bites:

  • Director dealings:
    • Although not a traditional director dealing as this is institutional money linked to director representation on the board, it’s still worth mentioning that Capitalworks Private Equity bought R7.4 million worth of shares in RFG Holdings (JSE: RFG).
    • A director of a major subsidiary of Insimbi Industrial (JSE: ISB) sold shares worth R8.9k.
  • Ethos Capital (JSE: EPE) announced that exchange control approval has been received for the Brait (JSE: BAT) unbundling. Ethos shareholders will be in the lucky(?) recipients of 0.50857 Brait shares for each share held in Ethos.
  • Orion Minerals (JSE: ORN) announced “outstanding” drilling results for the first diamond drill holes at Flat Mine South. The initial bankable feasibility study is nearing completion, with the company also highlighting the potential to expand the mine and extend the mine life thanks to the opportunities presented by the broader Okiep district. The Okiep properties achieved historic production levels of 20,000 to 50,000 tonnes of copper under the previous owners, so the track record is there. This is like a restoration of a classic car!
  • Accelerate Property Fund (JSE: APF) has announced a delay to the release of audited financial statements for the year ended March. They are now expected to be released by 15 July.

Ghost Bites (Accelerate Property Fund)

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The Cherry Lane deal has popped for Accelerate (JSE: APF)

But more importantly, there’s a Category 1 transaction linked to related party debt

Accelerate Property Fund has been on a mission to improve its balance sheet through a combination of capital raising and capital recycling activities. “Recycling of capital” is just a fancy term in the property sector for selling properties that are currently in the portfolio and turning that value into cash which can either be deployed into other properties or used to reduce debt.

Unfortunately, the plan to recycle the capital in Cherry Lane Shopping Centre has hit a snag. The deal to sell it to QSPACE has fallen through. Accelerate is in discussions with other potential buyers, but no agreement has been reached at this stage.

Now that the easy update is out of the way, we get to the more technical one. There has been an awkward situation for a while at Accelerate regarding a dispute around the Fourways Mall Shopping Centre, with the ex-CEO of Accelerate in a conflicted position as he sits on both sides of the claim. Michael Georgiou was CEO until April 2023 and is now on the board of the listed company as a non-executive director.

There are various other parties involved as well. On top of that, there are many related party balances linked to various transactions, as you’ll see below.

There are a number of complexities here, with the high-level summary being that after a few cessions of debt and other calculations, an entity called Azrapart owes R797 million to Accelerate.

That’s not all folks, as Accelerate previously intended to settle a debt to Azrapart of R300 million in cash. Due to liquidity constraints at Accelerate, the parties agreed to go off and find other ways to settle everything.

The solution? Well, there are a few steps to it.

Azrapart accepts payment of R300 million plus R71 million in time-related charges as full and final settlement of the “rebuilt claim” that Azrapart has against Accelerate, in exchange for settlement against the balance owing on Azrapart’s debt to Accelerate.

Furthermore, Accelerate will purchase bulk related to Fourways Mall from Azrapart for R74.7 million, also set off against the debt.

There’s also a transaction related to the internalisation of the management company and the termination of the existing management agreement, which leads to roughly R110 million being owed by Accelerate to Azrapart. At this point you get no prizes for guessing that the amount is set off against the loan.

As part of the headlease termination agreement, Accelerate would owe an amount of R395 million to Azrapart. Again, this is being set off against the debt.

Now, the maths is not quite mathing here by my calculations, but there are many parties involved and I suspect that parts of these claims might be owed to some of them.

The announcement explicitly says that the loans will be 100% set-off by the various steps with no cash outflow from Accelerate, so that’s the overall summary of these transactions. Thankfully, there will be a Category 1 circular released that will include further details on all the steps, at which point the maths will be clear.

The Accelerate share price remains a sad story vs. pre-pandemic levels:

Going back further is even worse unfortunately, as this stock was trading well above the R6 mark during the property bubble on the JSE from 2014 – 2017.

Please note: an earlier version of this update erroneously referred to Michael Georgiou as the current CEO of Accelerate Property Fund. My apologies for this.


Little Bites:

  • Director dealings:
    • A director of Afrimat (JSE: AFT) sold shares worth just over R1 million.
    • A director of Stefanutti Stocks (JSE: SSK) bought shares worth R679k.
    • A director of Omnia Holdings (JSE: OMN) sold shares worth R281k.
  • To give you an idea of where the liquidity is for Tharisa (JSE: THA), the company announced the share buyback activities for the week ended 5th July. They repurchased only 11,695 shares on the JSE vs. 329,041 shares on the London Stock Exchange.
  • If you are a shareholder in Datatec (JSE: DTC), then take note that the company has released the 30-day VWAP for the calculation of the scrip dividend alternative.

Millennials and Gen Z are Shaping the Future of Investing

Satrix’s data shows that in 2022 and 2023, 57% of inflows to the SatrixNOW platform came from account holders under 40 (as of April 2024). This is extremely positive, suggesting younger generations are driving healthy investing habits. With increasing focus on financial literacy among younger people, it is an opportune moment to delve into how younger generations are redefining investment trends, their approach to financial independence, and their challenges.

Gen Z, especially, seems to be more financially optimistic than other generations. Answering this optimism with opportunity could be a game-changer for South Africa. If we can shift an entire generation’s saving and investing behaviour by laying solid foundations early on, this could start to change the country’s negative narrative around the chronic lack of household savings for the long term.

We can see young people have many healthy investing habits forming, however, there’s the need to make money ‘stickier’ so individuals invest for the long term and don’t draw on their savings and investments for short-term goals. Here are some of the saving and investing behaviours we’re witnessing in South Africa’s younger generations:

Financial Independence and Retirement Planning

Young people are engaged and also proactive about their financial futures. Data from Satrix reveals that by April 2024, investors under 40 accounted for most of the SatrixNOW platform’s investment accounts: 56% of Satrix Tax Free Savings accounts**, 48% of Satrix ZAR (or standard) accounts and 50% of the other accounts on the SatrixNOW platform belong to people under 40.

Additionally, and positively, they are forward-thinking regarding their retirement, holding 44% of the platform’s Retirement Annuity accounts. While some would expect the youth to be less proactive about retirement planning, this proactive stance is possibly fuelled by the rise of the gig economy and entrepreneurial ventures, fostering a mindset of financial self-reliance and a keen interest in fintech solutions.

Rising Trend in Investment Accounts

Over the past three years, there has been a significant uptick in investment account registrations by under 40s on SatrixNOW. They accounted for 72% of new registrations in 2023 and 76% in 2022, with two-thirds of these being individuals under 30. The appeal lies in the simplicity and accessibility of investing apps, which offer low fees and no minimum investment amounts, making it easier for younger individuals to start their investment journeys.

Social Influence and Word of Mouth

Social media and peer influence seem to play crucial roles in driving investment trends among young people. The fear of missing out (FOMO) and the influence of social media influencers discussing investments may be amplifying younger generations’ decisions to invest.

Satrix referral channels indicate that people under 40 make up 83% of registered accounts that found the online investing platform via ‘referrals’.

Challenges with Long-Term Investment

Despite their enthusiasm, young people face challenges with maintaining long-term investments.

In 2022-2023, people under 40 made 57% of all deposits. Over the past three years 59% of this cohort made withdrawals. Encouragingly, however, they only accounted for 20% of total withdrawals made in rand terms. This may suggest a lack of “sticky money”, which means funds remain invested over the long term despite market fluctuations. Factors such as financial pressure, economic uncertainty, and short-term financial goals may contribute to this high withdrawal rate. There is a clear need for more education on risk tolerance and long-term investment benefits to address these challenges.

Investment Optimism and Openness to Advice

The younger generation’s affinity for technology makes them optimistic and open to financial advice. They actively seek educational content through video channels, social media influencers, webinars, and podcasts that simplify investment concepts. This openness to learning and guidance can be harnessed by investment platforms to foster a deeper understanding of long-term investment strategies and risk management. We need to rally to better answer their call for understanding with omnichannel, accessible education.

The Bigger Picture: Financial Inclusion and Economic Impact

Encouraging a robust and inclusive financial environment is crucial for fostering a financially responsible generation. The financial savviness of Millennials and Gen Z can help reduce economic disparities, particularly in a country like South Africa, which faces significant financial inequality. Increased savings and investments among young people can boost capital availability in the stock market, fostering innovation in businesses and addressing social issues like high unemployment. Moreover, a well-informed younger generation can reduce reliance on government grants, contributing to a more stable and prosperous economy.

Millennials and Gen Z are at the forefront of a financial revolution, leveraging technology and digital platforms to navigate the investment landscape. While they show a strong inclination towards financial independence and innovative fintech solutions, challenges remain in fostering long-term investment habits. With targeted education and guidance, these generations can play a pivotal role in creating a more equitable and financially inclusive future.

The potential for Millennials and Gen Z to shape the financial world is immense, and their proactive engagement in investing is a promising step towards a more stable and prosperous economy.

**Tax Free Savings Accounts: Annual limit of R36 000, lifetime limit of R500 000, 40% tax penalty applicable for contributions above the limit, per individual. For more information visit https://satrix.co.za/tax-free-investments

Indexation: Anything but Passive.Take control of what you're investing in by incorporating indexation into your portfolio. Satrix - Own the market

Disclaimer

*Satrix is a division of Sanlam Investment Management.

Satrix Investments (Pty) Ltd is an approved FSP in terms of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision.

Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities.

While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaim all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information. 

Short Stories v.02: Businesses behaving badly

Every so often, I come across a story that I think would work well for this audience, only to find that it is actually just too light to justify a full article. Never one to deny you informative (and interesting) content, I’ve decided to alternate my usual long writing format with the occasional collection of short stories, tied together by a central thread but otherwise distinct from each other. 

In V02 of my Short Stories, I’m sharing three tales of businesses behaving badly (and in some instances, getting away with it too). Read them and weep.

1. Amazon: Spycraft and other shenanigans

Stand aside, James Bond. The Wall Street Journal recently reported that Amazon has been engaged in a covert operation called “Project Curiosity” for nearly a decade, using a shell company named Big River to spy on competitors such as Walmart, eBay, and FedEx. 

And yes, they really named their shell company Big River. As far as disguises go, this is the corporate version of putting on one of those pairs of novelty glasses with the fake moustache attached. 

Apparently the project, which began in 2015, was initially intended to compare the experiences of third-party sellers on Amazon with those on rival e-commerce platforms. However, it soon evolved into a more direct method of gathering intelligence on competitors. Big River operated warehouses in five countries and sold merchandise on platforms like Walmart, Best Buy, and Overstock. It also utilised logistics services from FedEx, UPS, and other competitors. Amazon employees involved in Project Curiosity were instructed to capture photos and screenshots of competitors’ pricing, cataloguing, and advertising systems. Big River / Amazon employees even attended rival conferences to gather exclusive information.

Amazon did not immediately comment on the matter, but a spokesperson told The Wall Street Journal that the company was merely engaging in “benchmarking,” the legal practice of comparing products to those of rivals. However, legal experts noted that Amazon’s covert tactics could potentially lead to corporate or industrial espionage lawsuits.

Several indicators pointed to the secretive nature of Project Curiosity. Amazon employees were instructed to keep the project confidential and avoid sharing screenshots via email to minimise the paper trail linking Big River to Amazon. Furthermore, Big River employees were advised not to disclose their connection to Amazon to logistics partners like FedEx.

Despite attempts at secrecy, there were more than a few signs of Amazon’s involvement with Big River. Some Big River employees listed Amazon as their employer on LinkedIn, and Big River’s fictitious Japanese streetwear brand, “Not So Ape,” listed a Seattle address on its webpage. Furthermore, Big River’s registration documents with the Washington Office of the Secretary of State included Amazon’s headquarters address.

By the numbers, Big River generated $125,000 in revenue from selling items on Walmart.com in 2023. According to a corporate filing in the United Kingdom, 75% of Big River is owned by Amazon. The expected costs of operating Big River in India in 2019 were $463,000, with projected revenues of $165,000, indicating that the shell company was not designed to be profitable.

With Project Curiosity only recently exposed, we’ll have to wait and see if any of the businesses that shared information with Big River will be waltzing Amazon to court. In the meantime, MI5 Amazon continues to deny that they were involved in any form of corporate espionage. 

2. Domino’s: Lawsuits, guaranteed

In October 1985, a Domino’s pizza delivery driver in Pittsburgh collided with another car while reversing out of the restaurant’s parking lot at high speed. Through the commotion that immediately followed, the store manager ran out, grabbed the pizza out of the crashed delivery vehicle and handed it to another driver, who took it and sprinted to his car. 

It may seem like a ludicrous shift in priorities, but for Domino’s employees at the end of the 80s, their 30-minute delivery policy was practically a matter of life and death. 

Domino’s rapid delivery policy was first introduced in 1960 by founder Thomas Monaghan, and played a significant role in the company’s initial growth. Monaghan, a former Marine, initially hired only two delivery drivers and focused on a minimalist, delivery-centric business model. By the 1980s, Domino’s became a leading pizza chain as Americans embraced the convenience of home delivery, driven by increased workforce participation and the rise of quick, easy meals like microwave dinners. People wanted pizzas, and they wanted them fast.

In 1985, Domino’s claimed that they could cook and deliver a pizza within 30 minutes. What started as a recommendation soon became a guarantee, with late deliveries resulting in free or discounted pizzas. This policy was hugely successful, with 95% of pizzas nationwide delivered within 30 minutes in the late 1980s. Domino’s corporate headquarters scrutinised performance monthly through mystery customers who evaluated delivery times and quality.

This 30-minute guarantee, however, led to reckless driving and numerous accidents. While they were never explicitly instructed by the company to do so, Domino’s delivery drivers would do anything from running stop streets to driving without their seat belts fastened so that they could exit their vehicles faster upon arrival. Domino’s knew of 20 fatalities involving its drivers in 1988 alone. According to the National Safe Workplace Institute, this meant that Domino’s delivery drivers had about the same death rate as miners, who had a fatality rate of ~35 per 100k.

Kenneth Behrend, the lawyer representing the couple who were injured in the collision with the reversing delivery man in Pittsburgh, leveraged this incident to build a case against Domino’s. He founded the Delivery Services Negligence Litigation Group to assist other lawyers in suing Domino’s using a negligent corporate policy claim. By 1990, at least 200 lawsuits had been filed against the company.

In late 1993, a lawsuit involving a woman struck by a Domino’s driver resulted in a jury awarding $78 million in punitive damages. This high-profile case, combined with mounting public pressure, led to Domino’s finally ending the 30-minute delivery guarantee. Thomas Monaghan announced the policy’s termination, acknowledging that despite efforts in safety and driver training, the guarantee had created a negative public perception.

And you thought being made to wear a Butlers uniform was the worst thing that could happen to a delivery driver. 

3. Nestlé: Not a right, but a need

Access to safe drinking water is widely considered a fundamental human right, not so? If a guest at your next dinner party were to argue otherwise, you would probably assume them to be crazy. 

Well, Nestlé feels differently about it. 

At the 2000 World Water Forum in the Netherlands, Nestlé was at the head of a group of corporations that influenced the official classification of water from a “right” to a “need.” Peter Brabeck-Letmathe, former Nestlé chairman and CEO, controversially stated in 2005 that “access to water should not be a public right.”. While the company has backpedalled on this statement for years – even dedicating a whole page of their website to it – Brabeck-Lemathe’s statement aligns with Nestlé’s practices of acquiring aquifers in local communities and bottling the water for profit.

One stark example is in Bhati Dilwan, a small Pakistani village. The advocacy group Sum of Us has initiated a petition against Nestlé for depleting the community’s water supply to bottle it as Pure Life water at a nearby plant. They claim that Nestlé’s activities have drastically lowered the water table, forcing villagers to consume contaminated water. Sum of Us argues that Nestlé’s policies deprive many people of essential water resources, warning that unchecked corporate control could worsen global water access issues.

Nestlé disputes these allegations, asserting that their operations are closely monitored and have no significant impact on groundwater levels. The company also insists that Brabeck-Letmathe’s comments were misinterpreted, emphasising their commitment to ensuring clean water access as a basic human right. Nestlé states that they collaborate with public bodies, communities, experts, and governments to promote effective water management.

Nevertheless, this is not the first time Nestlé has faced criticism over its business practices, particularly with regards to its bottled water. In 2008, a coalition challenged advertising claims made by Nestlé Waters that “bottled water is the most environmentally responsible consumer product in the world”. The group, which includes Friends of the Earth Canada, the Polaris Institute, the Council of Canadians, Wellington Water Watchers, and Ecojustice, filed a complaint under the Canadian Code of Advertising Standards against Nestlé Waters North America. 

The groups argue that Nestlé is attempting to mislead the public on the true impacts of bottled water, by using such phrases as “most water bottles avoid landfill sites and are recycled” and “Nestlé Pure Life is a Healthy, Eco-Friendly Choice”. The complaint alleges that some of the statements in Nestlé’s ads are contrary to guidelines that have been set by Canada’s Competition Bureau and the Canadian Standards Association to ensure environmental claims are specific and verifiable.

If you’re a regular column reader, you’ll know that this isn’t the first time that I’ve written about dodgy practices at Nestlé (to catch up, check out this article here). As one of the five biggest companies in the world, it certainly feels as though Nestlé can face almost any controversy and come out mostly unscathed.

Editor’s note: if you want to give your kids exposure to what corporate greed looks like, The Lorax is an excellent choice of movie. The killer quote: “Our research shows that if you put something in a plastic bottle, people will buy it!” Here’s the scene from the movie with the commercial for the bottled air:

About the author: Dominique Olivier

Dominique Olivier is the founder of human.writer, where she uses her love of storytelling and ideation to help brands solve problems.

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting.

Dominique can be reached on LinkedIn here.

Ghost Bites (Glencore | Orion Minerals | South32 | Telemasters)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:


Glencore’s acquisition of Elk Valley Resources is unconditional (JSE: GLN)

This means that all relevant approvals have now been received

Glencore has received the final regulatory approval for the acquisition of Elk Valley Resources, with the Government of Canada having signed off on the acquisition of a 77% interest in Elk.

The deal is therefore expected to close on 11 July.

Glencore is familiar with Canada and has already been operating in that country, so that would’ve helped with getting the approval across the line. They had to make a number of commitments to the Canadian government as part of the approval, including around management and employment levels. They’ve also had to commit to a minimum level of capital expenditure.

If you would like to see the full list of commitments, you’ll find it here.


Orion Minerals has opened its share purchase plan (JSE: ORN)

Eligible shareholders can apply to invest in more shares in the company

Orion Minerals announced a few days ago that around R92 million in new equity funding has been secured from sophisticated and professional investors. They are issuing shares at R0.18 per share to these investors.

In addition to this, Orion Minerals is giving the broader shareholder base an opportunity to participate in an equity capital raise of up to R60 million. The company refers to this as a share purchase plan. The eligibility is based on the registered address of the shareholder – and yes, South African shareholders qualify for this. The plan opened on Friday and will close on 23 July, so you have a couple of weeks to pull the trigger here if you so desire. The placement price is R0.18, which is the same price as the private placement mentioned above.

The funds from the placement and the share purchase plan will primarily be used for the development of the Prieska Copper Zinc Mine, as well as infrastructure development at the Okiep copper project. Naturally, they will also use some of the funds for advancements on other prospecting and mining rights and general working capital purposes.

The total amount raised under the share purchase plan is subject to change. The company has the flexibility to increase the raise if there is sufficient demand, or scale it back if the interest doesn’t come through as expected levels.

There’s a booklet available that explains the share purchase plan in full, along with frequently asked questions and other interesting information. It also includes details on how to apply. You can find it on the home page of the Orion website here.


South32 is a step closer to selling Illawarra (JSE: S32)

There are still some regulatory hurdles to clear

South32 has announced that the sale of Illawarra Metallurgical Coal to Golden Energy and Resources and M Resources has obtained approval from the Australian Foreign Investment Review Board.

This is an important step but not the final one, as there are foreign merger clearances that still need to be obtained.

South32 expects the transaction to be completed in Q1 FY25, although it’s always good for investors to remember that regulatory approvals can take an unexpectedly long time.


Telemasters flags some potential corporate activity (JSE: TLM)

We could see a mandatory offer for the company

Aside from two embarrassing corrections to the SENS announcement around its dividend, Telemasters has released an announcement related to two potential corporate actions at the company.

The first is that a B-BBEE investor has approached the two largest shareholders of Telemasters to acquire their shares, with no guarantee at this stage that a deal will be agreed. The relevance to other shareholders is that if an acquisition goes ahead, the stake would be of sufficient size that a mandatory offer would be triggered.

Separately, the company is looking at a potential acquisition. It’s very important to understand that the abovementioned deal is being negotiated by shareholders, whereas the acquisition by Telemasters is being negotiated by the company’s management team and board. And once again, there’s no guarantee at this stage of a deal taking place.


Little Bites:

  • Director dealings:
    • Directors of Lewis Group (JSE: LEW) sold R6.7 million worth of shares from vested awards. The announcement doesn’t explicitly say that the sales were to cover taxes.
    • A director of Copper 360 (JSE: CPR) has acquired shares worth R2.2k.
  • Brait (JSE: BAT) announced that the holders of the exchangeable bonds have approved the resolutions related to the extension of the term of these instruments.
  • Trematon (JSE: TMT) has released a cautionary announcement regarding a potential disposal that could impact the share price. No further details have been released at this stage.
  • Never one to miss an opportunity to release a SENS announcement, Kibo Energy (JSE: KBO) noted that the first tranche placing proceeds of £150k have been received and shares have been issued to Peter Williams. The audit of the 2023 accounts will now proceed. The board changes announced in June have been partially completed.

Unlock the Stock: Spear REIT and Adcorp

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.

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

In the 37th edition of Unlock the Stock, we welcomed Spear REIT back to the platform and Adcorp for the first time. To understand the drivers of the share price performance, The Finance Ghost co-hosted this event with Mark Tobin of Coffee Microcaps and the team from Keyter Rech Investor Solutions.

Watch the recording here:

Ghost Bites (Lighthouse Properties)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:


Lighthouse pushes forward with the Iberian strategy (JSE: LTE)

To complement the existing portfolio in Spain, there’s now an acquisition in Portugal

Lighthouse Properties has made no secret of its ambitions in Iberia, part of a broader strategy targeting “dominant and defensive malls in growing regions” – a sound approach if you ask me. Retail property landlords benefit tremendously from regions with decent growth in consumer spending.

The latest transaction is the acquisition of Alegro Montijo, a regional mall in the municipality of Montijo. There are a number of important tenants in the mall (like Primark and Zara) and it falls under the broader Lisbon metropolitan area, so this is in the economic heart of Portugal.

The deal value is €177.8 million before debt, or €76.3 million net of existing senior bank debt in the property entity. The net initial yield for the acquisition is 7.2%. Lighthouse will fund the deal from existing cash resources.

Following this acquisition, the Iberian portfolio will constitute 72.2% of the pro rata fair value of Lighthouse’s directly held properties.


Little Bites:

  • Director dealings:
    • I would pay very close attention to this one: an associate of the co-founder of Mr Price (JSE: MRP) sold shares in the company worth a whopping R42 million. After the recent GNU-inspired rally, that’s a signal for me that the shares are overvalued.
    • Certain directors and prescribed officers of Dis-Chem (JSE: DCP) sold shares worth nearly R1.6 million. This was linked to forfeitable share options and the announcement wasn’t explicit on whether this was only the taxable portion.
    • A director of Stefanutti Stocks (JSE: SSK) bought shares worth nearly R38k.
    • A director of a subsidiary of Vunani (JSE: VUN) has sold shares worth R27.5k.
  • Here’s one you don’t see every day: Sea Harvest (JSE: SHG) will ask shareholders to amend the Memorandum of Incorporation (MOI) to allow for the appointment of directors over the age of 75. This is due to a director nomination made by Terrasan (which holds 16.7% in Sea Harvest) to the board of Sea Harvest.
  • With the unbundling of Rainbow Chicken (JSE: RBO) concluded, the company reminded the market that Remgro holds 80.2% of the shares in Rainbow, as Remgro held this percentage in RCL Foods which unbundled Remgro. In other words, this is a tightly held register.

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

Exchange-Listed Companies

Lighthouse Properties is to acquire Alegro Montijo, a regional mall which forms part of the greater Lisbon Metropolitan in Portugal for €177,8 million. The property is currently owned by Tiekenveen Holdings (98%), an Amsterdam-based company and Valportugal (2%). The acquisition follows two recent acquisitions in Spain.

Rand Merchant Bank (FirstRand) has disposed of RMB Nigeria Stockbrokers to Zedcrest, a Nigerian financial solutions firm. Financial details were undisclosed.

Bidvest has entered into an agreement to acquire 100% of Citron Hygiene LP, headquartered in Toronto, Canada from Birch Hill Equity Partners and other investors. Citron is a provider of washroom hygiene products and services in the US, Canada and UK. The acquisition, the value of which was not disclosed, will be fully funded through the variable rate Revolving Credit Facility. Bidvest also advised shareholders of a proposed restructure of its financial services division, with the board approving a process to dispose of Bidvest Bank and its related entity, FinGlobal. The short-term insurance businesses within the financial services division will be transferred to the automotive division. The disposal of Bidvest Life, which was announced previously, is according to the announcement, underway.

NE Property B.V., a subsidiary of NEPI Rockcastle is to dispose of the retail property known as Promenada Novi Sad for €177 million, to a Serbian subsidiary of CEE BIG B.V. The disposal is consistent with NEPI’s investment strategy to focus on core dominant properties and increase its presence in countries with investment grade ratings.

Brikor’s board of directors is considering proposing a scheme of arrangement in terms of which the shares of the remaining shareholders (excluding Nikkel Trading 392) will be repurchased. Specific details are yet to be announced but should the terms be accepted, Brikor will delist from the JSE.

Following the judgement of the Constitutional Court in March 2023 and as part of the constructive engagement process with the Department of Health, Clicks will divest of its total shareholding in the manufacturing pharmacy Unicorn Pharmaceuticals. The completion of the Unicorn disposal is expected to be completed by the end of July 2024 which will pave the way for the issue of outstanding and new licenses by the Department of Health.

The Vision Group’s business rescue plan for Tongaat Hulett, accepted by shareholders earlier this year, will see Vision acquire the claims from its lenders. Vision will use a portion of these claims to subscribe for 4,86 billion new ordinary shares in Tongaat at 101 cents per share, the effect of which will be to recapitalise its balance sheet. The equity subscription by Vision will result in it owning 97.3% of the issued share capital of Tongaat which will trigger a mandatory offer and delisting of the company unless a waiver by shareholder and the Takeover Regulation Panel is sought and granted.

Unlisted Companies

Renew Capital, a US-based Africa-focused impact investment firm that backs innovative companies with high-growth potential, has made an investment into Pumpkn, a local startup and agribusiness loan platform. Pumpkn leverages data to make credit assessments of agricultural small and medium-sized agribusinesses, assisting lenders to easily identify bankable businesses. Financial details were undisclosed.

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

Weekly corporate finance activity by SA exchange-listed companies

Kore Potash has conditionally raised c.US$1,28 million through the proposed issue of 91,802,637 new ordinary shares at a price of US$0.014 per share. 87,5 million shares have been placed with new and existing shareholders. The placing of the remaining 4,3 million shares with the company’s existing chairman, is conditional on shareholder approval, which will be sought in due course. The proceeds of the fundraise will be used to progress the Kola Potash Project.

Texton Property Fund has reduced its exposure in Blackstone Real Estate Income Trust iCapital Offshore Access Fund. The shares have been redeemed at R110 million which compares with the average acquisition price of R91,9 million – together with the total monthly distributions that were received during the hold period. The investment yielded a return during the holding period of 31.05%.

Vukile Property Fund will issue 36,978,550 new shares at R14.50 per share in terms of its dividend reinvestment alternative offered to shareholders. Shareholders holding 745,47 million (67.5%) Vukile shares elected to receive the dividend reinvestment alternative resulting in the retention of R536,2 million in new equity.

Firm commitments have been received by Orion Minerals for a placement of c. 513 million shares at an issue price of A$0.015 (R0.18) per share to raise A$7,7 million (R92,34 million). The funds will, in principle, be used to progress the development of the Prieska Copper Zinc Mine.

Following the listing of Rainbow Chicken by RCL Foods, Rainbow Chicken will be unbundled to shareholders by way of a pro rata distribution in specie.

Momentum Metropolitan shareholders have approved the change of name to Momentum Group. The change will be effective from commencement of trading on 17 July 2024.

Basil Read’s listing on the JSE will cease on 8 July 2024 following various non-compliances since its suspension on 21 June 2018.

aREIT Prop, which listed in March 2022, was suspended last month for failing to submit its annual financial statements. The company now faces removal from the JSE Main Board.

The JSE and LSE have suspended the listing of Kibo Energy with immediate effect (1 July 2024) for failure by the company to publish its Annual Financial Statements by the 30 June 2024 as required by the listing requirements. Further, the JSE has notified shareholders of African Dawn Capital, Copper 360, Visual International and Acsion that the listings of these companies have been annotated with RE to indicate the failure to submit annual reports timeously and as such may be suspended if not submitted before 31 July 2024.

A number of companies announced the repurchase of shares:

In line with its share buyback programme announced in March, British American Tobacco this week repurchased a further 740,000 shares at an average price of £24.47 per share for an aggregate £18,1 million.

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 24 – 28 June 2024, a further 4,479,833 Prosus shares were repurchased for an aggregate €151,9 million and a further 336,220 Naspers shares for a total consideration of R1,21 billion.

Two companies issued profit warnings this week: Sable Exploration and Mining and ArcelorMittal.

Four companies issued cautionary notices this week: Cilo Cybin, Brikor, Tongaat Hulett and Salungano.

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

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

DealMakers AFRICA

Nigerian heathtech startup Blueroomcare has raised an undisclosed pre-seed funding round led by EHA impact Ventures. Other investors in the round included TVC Labs and Innovest Africa. Blueroomcare is an online, insurance covered, therapy platform that includes mental health services such as grief counselling, couples therapy, group therapy, trauma-focused therapy and addiction therapy.

Digital investment platform Level Africa has acquired Utilis Ventures, a Ugandan investment adviser. Financial terms were not disclosed. Utilis has been rebranded to Level Africa Uganda, effective 27 June 2024.

EdVentures has invested US$400,000 in Egyptian edtech Elkheta. The educational platform supports school students in Egypt with their studies by providing exercises, exams, interactive videos and direct teacher communication.

Finnfund has provided Communication & Renewable Energy Infrastructure (CREI) with a US$5 million mezzanine loan to facilitate the installation, operation and maintenance of 413 telecom site hybrid power solutions in South Sudan. CREI is a Dubai headquartered asset management company holding a portfolio of telecom towers and renewable power assets across Africa and Asia. The Finnfund loan will be used to finance CREI’s Telecom Energy Service Company in South Sudan.

CMILES CX has been acquired by US-based QuestionPro for an undisclosed sum. The Egyptian company specialises in customer experience technology solutions.

The International Finance Corporation has announced a potential US$50 million financing packing to B5 Plus, a Ghanian iron & steel company. The funding will be used to refurbish and repurpose a newly acquired steel plant at Tema Freezone to produce rebars and wire rod coil; to install a wire rod mill at Tema Freezone; develop a 10MW solar plant in the Prampram facility and fund working capital needs.

Kenya’s Peleza International has announced that it will merge with international digital security and compliance infrastructure company Prembly Ltd. The combined business will be known as Prembly Group and will be headquartered in the United States. Financial terms were not disclosed.

Zedcrest Group has acquired RMB Nigeria Stockbrokers. Financial terms of the deal were not disclosed.

Triton Minerals has sold 70% of its stake in the Ancuabe Graphite Project, including a 70% interest in the intellectual property and drill core assets relating to the Nicanda Hill and Nicanda West projects plus 70% of its interest in the Cobra Plains mining concession, to Shandong Yulong Gold. The transaction consideration of A$17 million will be settled in three tranches.

Enko Education has expanded into its 10th African country with the acquisition of Cours Lumiére in Lomé, Togo. This transaction also marks the 16th school to join the African international school’s network. No financial terms were disclosed.

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

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