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

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Exchange-Listed Companies 

Sanlam has increased its stake in Shriram General Insurance (SGIC) and Shriram Life Insurance Company (SLIC). India is seen as a core market and strategic pillar to achieving long term earnings growth and sustainable shareholder value creation for Sanlam. Sanlam has acquired a further 10.74% stake in SGIC and 12.02% in SLIC from TPG India Investments II and Shriram Ownership Trust. The R2 billion purchase consideration will be partly funded from the net proceeds of its R3,3 billion disposal of a 1.56% sale of its Shriram Finance (SFL) stake to Shriram Value Services. Following the transaction, Sanlam’s effective economic shareholding in SGIC will increase to 50.99% and to 54.40% in SLIC. Its shareholding in SFL will decrease to 9.54%.

Shoprite has teamed up to form a venture capital fund with four global grocery leaders – Ahold Delhaize (US, Europe, Indonesia), Tesco (UK, ROI, Europe), Woolworths Group (Australia, New Zealand) and Empire Company/Sobeys (Canada) with Shoprite representing the African footprint. The new collaborative retail venture capital fund, W23 Global, will seek to invest US$125 million over five years in the world’s most innovative start-ups and scale-ups with the potential to transform grocery retail and address the sector’s sustainability challenges. Each retailer is an equal funder and partner in W23 Global, while their CEO’s will sit on the investment committee. Their ambition is to offer their portfolio companies faster pathways to global scale, without being exposed to a venture fund anchored by a single strategic investor.

This week, MultiChoice told shareholders that it would work closely with Canal+ on the mandatory offer made to shareholders. Canal+ has offered MultiChoice shareholders R125 per share in cash, significantly above the minimum price of R105 required by the takeover regulations – the price at which it acquired shares which triggered the mandatory offer. If shareholders with at least 90% of eligible MultiChoice shares accept the offer, then MultiChoice may delist from the JSE. However, shareholders may have the opportunity to participate in Canal+’s own proposed listing in Europe as part of a secondary inward listing on the JSE.

Micawber 832 purchased 185 Katherine Street (Pri-movie Park) and 1 Charles Crescent in Eastgate from Accelerate Property Fund in October 2023 for R117 million. Accelerate has announced that that Micawber has elected to nominate Emidomax in its place as the purchaser of Pri-movie Park and Minropox as the purchaser of 1 Charles Cresent (both beneficially owned by Africrest Properties and Old Mutual). All other terms and conditions remain unchanged.

The saga of the off-market takeover offer by Goldway Capital Investment of MC Mining shares ratchet up another notch this week with the company’s board advising shareholders to consider accepting the offer. With Goldway proposing to delist the company, citing limited liquidity in the trading of the shares, MC Mining’s board believes that there is no likelihood of an alternative bid or competing proposal on more favourable terms in the near term. Goldway, a consortium which includes MC Mining’s largest shareholders Senosi Group Investment Holdings and Dendoceptin, has an 83.67% stake in MC Mining.

Following the acquisition in March 2023 of a 74.2% stake in IQbusiness, Reunert is considering merging the business with +OneX into a single client-focused business, to create a digital integrator within Reunert ICT. The final decision on the combination is still to be made and will requiring the respective board and shareholder approvals. 

Unlisted Companies

Vantage Capital, Africa’s largest mezzanine debt fund manager, has announced that it has made a R346 million investment into Procera Group, a South African business process outsourcing (BPO) services provider. Vantage’s investment comprises the acquisition of a significant minority equity stake from the Procera founders as well as the provision of a mezzanine facility to support future strategic acquisitions by Procera. The group currently services over 50 local and international blue-chip clients across key industries such as Retail, Financial Services, Energy and Telecommunications in South Africa, Namibia, United Kingdom, United States and Australia.

Isipho Capital has added to its portfolio with the acquisition of the Hino dealership located in Pomona Johannesburg, making it the first 100% black-owned Hino dealership in the country. The dealership is also 65% women-owned. Other businesses in its portfolio include interests in Mr Coach, which specialises in ambulances, mobile clinics, hearses, buses, and other conversions, as well as Kholeka Engineering, which is known for its manufacture of truck bodies, trailers, people carriers and water tankers.

Enko Capital Managers has exited its 2015 investment in Madison Financial Services. The exit of the Zambian microfinance services group, by Enko Africa Private Equity Fund to Cape-based asset manager Mergence Investment Managers is by way of the sale of its entire equity and debt. Madison operates general and life insurance businesses along with microfinance activities in Zambia and a general insurance business in Tanzania.

DealMakers is SA’s M&A publication.

www.dealmakerssouthafrica.com

Weekly corporate finance activity by SA exchange-listed companies

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Ellies, which entered voluntary business rescue in January this year, has advised that the appointed business rescue practitioner has concluded that there is no reasonable prospect of the Company being rescued. Given this, an application will be made to the place the company into liquidation.

WeBuyCars listed on Thursday 11 March, 2024 with a market capitalisation of R8,51 billion. The final number of ordinary shares in issue at the listing date was 417,181,120. The share price closed on its first day of trading at R20.40 – up close to 9% on the R18.75 price per share of its initial public offering.

A number of companies announced the repurchase of shares.

British American Tobacco has commenced its programme to buyback ordinary shares using the £1,57 billion net proceeds from its sale of ITC shares. The company will buy back £1,60 billion of its ordinary shares – £700 million in 2024 and the remaining £900 million in 2025. This week the company repurchased a further 1,480,000 shares at an average price of £23.35 per share for an aggregate £3,48 million. 

Prosus and Naspers continued with their open-ended share repurchase programmes. During the period 2 to 5 April 2024, a further 2,426,285 Prosus shares were repurchased for an aggregate €71,59 million and a further 226,606 Naspers shares for a total consideration of R749,3 million.

Two companies either issued, renewed, or withdrew cautionary notices this week: Tongaat Hulett and MultiChoice.

DealMakers is SA’s M&A publication.

www.dealmakerssouthafrica.com

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

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DealMakers AFRICA

Edgars has successfully listed on the Victoria Falls Stock Exchange on Friday 5 April following shareholder approval to delist from the Zimbabwe Stock Exchange last month. 

Enko Capital Managers has exited its investment in Zambia’s Madison Financial Services to subsidiaries of Mergence Investment Managers in Cape Town. Madison was the first investment made by the Enko Africa Private Equity Fund back in 2015. This marks the fund’s sixth successful exit out of seven investments.

Prospect Resources has acquired an 85% stake in the Mumbezhi Copper Project in the Zambian Copperbelt from current owners, Global Development Cooperation Consulting Zambia. As settlement, Prospect will pay US$5,5 million in cash plus issue US$1million in shares. 

Ghanian digital bank, Affinity, has received an undisclosed investment from Renew Capital as it looks to expand across the continent.

Nigerian Exchange Group, FSD Africa and Trade and Development Bank Group, along with other domestic and international investors, participated in a capital raise for the Ethiopian Securities Exchange of ETB 1,514 billion (US$26,6 million) which represented a subscription of 240% on its initial target of ETB631 million (US$11,07 million).

SunCulture has raised US$27,5 million in an oversubscribed series B fundraise to scale its solar irrigation offering across sub-Saharan Africa. As part of the Series B, InfraCo Africa made a US$12 million equity investment in the Kenyan firm.

Altona Rare Earths and Ignate African Mining P/L have entered into an option agreement which gives Altona an exclusive option to acquire up to an 85% interest in Prospecting Licence PL2329/2023, known as the Sesana Project and located in Botswana’s Kalahari Copper Belt. The option agreement stipulates three tranche payments totalling US$110,00 in cash and US$250,000 in Altona shares over a four-year period.

The Board of Directors of Nigerian Breweries Plc is to recommend to shareholders at the next AGM that they approve a capital raise of ₦600 billion by way of a Rights Issue to help reduce the company’s debt burden and thereby strengthen its balance sheet. 

DealMakers AFRICA is the Continent’s M&A publication

www.dealmakersafrica.com

Froneman bets on guilt free hydrogen

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With the great majority of the world’s governments committing to decarbonising their economy within the next two generations, we are embarking on an adventure into the unknown.

What was once a debate over carbon price and emissions trading has evolved into an industrial policy competition. Along the path, there will be opposition and denial. There will be breakthroughs and unexpected victories. The cost of solar and wind electricity has dropped dramatically during the previous two decades, and battery-powered electric cars (EVs) have progressed from imagination to commonplace reality.

However, in addition to open resistance and unambiguous wins, we will have to deal with ambiguous situations, wishful thinking and motivated reasoning. As we seek technological solutions to the decarbonisation issue, we must be wary of the energy transition’s mirages.

Globally respected economist, Adam Tooze recently opined in Foreign Policy magazine that, right now, we face a similar dilemma – a dilemma of huge proportions – not with regard to H2O, but one of its components, H2—hydrogen. 

Green hydrogen is created when water is split into oxygen and hydrogen (natural gas), using wind or solar energy. Green hydrogen can replace fossil fuels.

“Is hydrogen a key part of the world’s energy future or a dangerous fata morgana?” Tooze reasoned rhetorically. “It is a question on which tens of trillions of dollars in investment may end up hinging. And scale matters.”

The real potential of green hydrogen, and how South Africa can take advantage of the anticipated demand in the drive towards clean, sustainable energy, was the subject of Johannesburg’s recent Indaba special session on green hydrogen so, clearly, industry is excited by its potential. Speaking to lawyers at Bowmans recently revealed that deal due diligence in the space is heating up. 

Green Hydrogen is coming into its own, with well over 500 projects globally, in various stages of development. The challenge so far has been getting these projects to financial close. Rebecca Maserumule, Chief Science and Tech representative – Hydrogen and Vaccines inside the Department of Science and Innovation, recently told Catalyst that only roughly 4% of these projects have reached final investment decision (FID).

Priscillah Mabelane, Sasol’s Executive Vice President – Energy Business, was quoted by Reuters in November on the sidelines of a demonstration of an on-road, green hydrogen ecosystem, where a car developed by Toyota was shown to run on fuel produced by Sasol, saying that the firm expects green hydrogen to be cost competitive by 2035. By then, costs would come down to below US$2 per kilogram, from between $4 and $6 at present.

Mabelane said that the company was working with the government to define standards and regulations for green hydrogen, and to set up a port for the export of the green fuel.

Meanwhile, Sibanye Stillwater is betting on “turquoise hydrogen”. 

In an interesting move toward a sustainable energy future, Sibanye-Stillwater and Savant Venture Fund announced a strategic investment in BurnStar Technologies, a trailblazing South African clean hydrogen company. This collaboration stands as a significant milestone in South Africa’s commitment to sustainability, with a focus on the production of Guilt–Free (Turquoise) Hydrogen™.

BurnStar Technologies, positioned at the forefront of South Africa’s hydrogen transition, employs a cutting-edge patented liquid metal reforming process for hydrogen production. Through methane pyrolysis, BurnStar can convert Methane, LNG or LPG feedstock into high-purity hydrogen with near-zero carbon dioxide emissions. Sibanye is betting that this innovative technology propels South Africa towards a more sustainable, low-carbon hydrogen future. 

Under the strategic watch of CEO Neal Froneman, Sibanye-Stillwater (SSW) has established itself as one of the world’s largest primary producers of platinum, palladium and rhodium, and is a top tier gold producer. It also produces and refines iridium and ruthenium, nickel, chrome, copper and cobalt. The Group has recently begun to build and diversify its asset portfolio into battery metals mining and processing, and is increasing its presence in the circular economy by growing and diversifying its recycling and tailings reprocessing operations globally.

Froneman recognises the potential of hydrogen as a clean energy source. Through SSW’s iXS programme, powered by Savant, this strategic investment in BurnStar demonstrates his confidence in supporting South African innovation with global applications.

Savant Venture Fund, known for its focus on transformative technologies, views BurnStar’s clean hydrogen production as a game-changer in the global energy landscape. This investment aligns with Savant Venture Fund’s mission to accelerate the adoption of sustainable technologies.

Francois Malan, Partner at Savant Venture Fund, shares his enthusiasm: “We are thrilled to be investing in Johan Brand and his team as they commercialise what we believe to be a world-leading technology in clean hydrogen production. The BurnStar solution has strong commercial promise in both industrial processing application and clean energy storage. This investment will demonstrate the first step towards paving the way for guilt-free hydrogen™ applications, both locally and internationally.”

While some may be weary of the hype, the fact is that while we may not need 600 million, 500 million, or even 300 million tons of green and blue hydrogen by 2050, we currently use about 100 million and, of that total, barely 1 million is clean, so the opportunity is still attractive. 

And so far, few would bet against Froneman in pulling off another coup. 

This article first appeared in Catalyst, DealMakers’ quarterly private equity publication. 

DealMakers is SA’s M&A publication.

www.dealmakerssouthafrica.com

Navigating the crucial turning point for M&A in Africa

From global economic headwinds to regional challenges, our world has experienced a plethora of disruptions of late, which have invariably reshaped the contours of deal-making and investment. As significant changes ripple across continents, there is one that has begun to emerge as a focal point of interest: Africa.

With at least half of all global impact investment capital being injected into Africa, countries like Egypt, Kenya, Nigeria and South Africa stand as beacons, drawing significant attention. 

This investment flow has been most notably propelled by certain key sectors.

With escalating expenses in healthcare, key players are harnessing the power of digital health technologies – not only to curb soaring costs, but also to enhance their competitive edge and broaden the reach of medical services across the continent. Concurrently, there’s a palpable excitement among patients and healthcare consumers, who have swiftly embraced the numerous digital health solutions that emerged in the wake of the COVID-19 pandemic. This has resulted in pharmaceuticals, biotechnology, and medical services standing out as frontrunners for M&A activity in the sector, particularly within the private equity segment.

African fintech is also pulling in substantial investments, drawn by commitments to financial inclusivity and the promise of healthy returns among the continent’s youthful population. However, regulators have flagged concerns over consumer protection, data privacy and protection, and the competition implications of the digital economy – issues that must be addressed if the sector is going to continue to be attractive to international investors. 

The pressing need to rectify long-standing energy shortages throughout Africa, coupled with the shift in global priorities, has also amplified the focus on the renewable energy sector, making it a pivotal driver for M&A activity in the region. As several African nations grapple with intermittent power supplies and an over-reliance on fossil fuels, there is a growing recognition of the potential that renewable sources such as solar, wind and hydro present. 

As a result, M&A activity has surged, with conglomerates and startups alike seeking partnerships and acquisitions that can expedite the transition to cleaner energy solutions – presenting a dual opportunity for investment and impact.

Africa’s telecommunication sector has also emerged as one of the fastest-growing industries on the continent, and is poised to drive considerable economic growth in the future.

Another sector that has seen a resurgence is mining and minerals, as the need for essential minerals like copper, nickel, lithium and cobalt is on the rise globally, although commodity price deterioration and uncertainty are having a significant impact.

While these sectors highlight current M&A opportunities in Africa, other recent developments provide hope amid the challenging global economic conditions. For example, the African Continental Free Trade Area (AfCFTA) is gaining unprecedented momentum. Having garnered commitment from 54 nations and been ratified by 46, AfCFTA is poised to emerge as the world’s most expansive free trade zone. 

Its comprehensive protocols, ranging from goods and services trade to intellectual property and investment frameworks, are either already operational or progressing auspiciously. The anticipated dividends include a boost in intra-African commerce, the fostering of regional value networks, empowerment of African enterprises, and a reinvigorated stance on economic diplomacy.

Recent moves by BRICS to invite Ethiopia and Egypt (among others) to join South Africa, Brazil, Russia, India and China, collectively, to other trade agreements may pave the way for a more influential African voice in global politics, institutions and financial systems.

As the African investment landscape evolves, the emphasis on environmental, social and governance (ESG) considerations will intensify. The global pivot towards sustainable practices is undeniable, and businesses now face scrutiny not only for their contributions to sustainability but also the authenticity of their commitments, with accusations of ‘greenwashing’ under rigorous review.

Furthermore, the investor lens is adapting, particularly from an international stakeholder’s perspective. They are progressively gauging the long-term environmental and societal impacts of ventures they fund. It is evident that ESG considerations will be instrumental in steering future M&A strategies, influencing the choice of acquisition targets, valuation methods and risk assessments. Both buyers and sellers will find it imperative to showcase their ESG prowess, with these credentials increasingly serving as a barometer for an organisation’s ethos and growth potential. 

Notably, regulatory, public interest and local ownership considerations, as well as shareholder activism, are playing an increasing role in M&A. This has added additional burdens that parties ought to consider, although these are not usually insurmountable. 

Africa stands on the precipice of significant change, characterised by a confluence of dynamic factors that signal both formidable challenges and unparalleled opportunities. The shifts in the M&A terrain are not merely transactional, but transformative, marking a pivotal moment in the continent’s economic trajectory. 

Those equipped with the foresight to discern and adeptly engage with these changes will not only witness, but actively shape the next exciting chapter in Africa’s economic odyssey.

Tholinhlanhla Gcabashe is Co-Head of M&A and Cathy Truter is Head of Knowledge | Bowmans

This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication.

DealMakers AFRICA is a quarterly M&A publication
www.dealmakersafrica.com

Ghost Bites (Afrimat | Ellies | MC Mining | Tharisa)

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



Afrimat goes large with Lafarge (JSE: AFT)

The Competition Tribunal has approved the deal

Afrimat has a strong track record of value creation, with acquisitions having significantly boosted shareholder returns over the years. The market always pays attention when Afrimat announces new deals.

The acquisition of 100% of Lafarge South Africa was first announced in mid-2023. These things take time, particularly due to the regulatory approvals required along the way. It’s very important news that the Competition Tribunal has now approved the transaction, which makes the deal unconditional with a closing date of 24 April.

This is a significant step in the construction materials strategy, expanding the quarry and ready-mix operations nationally. There are various other strategic opportunities available to Afrimat from this deal, including entry into new value chains. Most of all, Afrimat will look to drive efficiency in the business and achieve a positive operating profit contribution.

CFO Pieter de Wit has been appointed as full-time Integration Manager for this process.


Farewell, Ellies (JSE: ELI)

Bad strategy leads to even worse outcomes

Sadly, when a company allows technological progress to overtake it, things can go wrong. Ellies (JSE: ELI) has been going from bad to worse and the final attempt to save the company was a renewable energy acquisition that failed to be completed. In any event, it did look as though they were going to overpay for the asset, which is why the funding couldn’t be raised. Even if the deal had gone ahead, there’s no guarantee that shareholders would’ve done well from it.

With the group having entered business rescue in early 2024, there weren’t many options available to the company. All hope has now been lost, with the company confirming that it will be liquidated. This is because there is “no reasonable prospect” of the group being rescued.

It’s always a sad day when a company goes to zero, especially a listed company that has been a household name.


The independent board at MC Mining throws in the towel (JSE: MCZ)

Goldway has achieved quite the victory here

After many back-and-forth announcements, Goldway has won the battle against the MC Mining independent board. It’s been quite a thing to witness, with Goldway using provocative language and trying hard to create doubt in the minds of shareholders over what the MC Mining board has been saying.

It worked, with enough acceptances of the Goldway offer to be able to declare it unconditional. This has driven a complete turnaround in approach by the MC Mining independent board, with a recommendation to shareholders to accept the offer due to the limited liquidity in the stock (assuming it remains listed) and the practically zero likelihood of an alternative bid on more favourable terms. The board also notes that if the offer isn’t accepted, there’s a chance of shareholders being stuck in an unlisted entity.

Kudos to Goldway. It’s been quite the masterclass in M&A strategy.


Tharisa achieves consistent PGM output (JSE: THA)

Chrome output is down from the previous quarter’s record production

Tharisa has released its production update for the second quarter of FY24, which covers the three months to March 2024.

PGM output was pretty consistent at 35.3koz vs. 35.7koz in the first quarter. The PGM basket price was also remarkably flat for the quarter, coming in at $1,343/oz vs. $1,344/oz in the first quarter. For sure, up is better than sideways, but consistent execution is a big part of building a successful mining group.

Chrome output came in at 402.7kt, which is well down on 462.8koz in the first quarter – admittedly a record quarter. Chrome prices were fairly steady at $286/t vs. $291/t in the first quarter.

Across both commodities, production guidance has been maintained for the full year.

Although debt came down a bit in the past three months, the drop in cash was larger. This means that net cash reduced from $94.9 million at the end of December 2024 to $70.6 million at the end of March. The management team remains confident though, with a $5 million share repurchased announced in March.

The Karo Platinum Project development is focusing on smaller work packages to limit the amount of capital required, while the company works on putting together the necessary third-party financing to deliver the first phase into production. If PGM prices keep improving, then I think there’s a good chance that they will put the hammer down on the project and accelerate it.

Finally, the group officially launched Redox One at the Africa Energy Indaba. This is an initiative to develop long-term energy storage solutions utilising the commodities mined by Tharisa. They cleverly call this a “mine-to-megawatt” strategy.


Little Bites:

  • Director dealings:
    • A director of a major subsidiary of OUTsurance (JSE: OUT) has bought shares in the company worth R583k.
  • After 13 years on the board and 5 as Chairman, Abiel Mngomezulu will retire from the board of Merafe (JSE: MRF). Ditshebo Stephen Phiri will take the role of Chairman after the 2024 AGM.

Ghost Wrap #66 (MultiChoice | Grindrod Shipping | MC Mining | Sanlam)

Listen to the show here:

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.

In this episode of Ghost Wrap, I focused on recent M&A news across various sectors:

  • MultiChoice’s R125/share mandatory offer from Canal+ and the potential strategic direction going forward.
  • Grindrod Shipping’s selective capital reduction and intended delisting, leaving Taylor Maritime as the sole shareholder.
  • MC Mining’s battle with Goldway and the surprising number of offer acceptances.
  • Sanlam’s clever deal in India to gain a more strategic position in Shriram.

Ghost Bites (Alphamin | Coronation)

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



Alphamin has caught up on delayed sales (JSE: APH)

EBITDA is vastly higher in this quarter than the immediately preceding quarter

In a mining group, there’s a big difference between commodities processed and commodities sold. Getting the stuff out of the ground is only the first part of the battle. For the three months ended March 2024, Alphamin’s production is only 1% higher than in the three months to December 2023. The difference is that sales more than doubled as the company dealt with a sales backlog caused by road conditions.

Needless to say, this means big things at EBITDA level. There’s a 156% quarter-on-quarter increase to $52 million. Of course, it helped a lot that the tin price was 7% higher at a time when the company could play catch-up on sales.

For reference, the tin price is up 12% year-on-year. The sales numbers aren’t a useful year-on-year comparison because of the sales backlog.

At Mpama South, tin production has been delayed by a few weeks. Underground development is on target though and ore stockpiles are being established ahead of the plant commissioning.

Thanks to a significant increase in the cash position, net debt has reduced from $73 million at the end of December 2023 to $28 million as at the end of March 2024.

The board will meet on 26 April to make a decision about the final FY23 dividend.


Coronation: be careful of the tax (JSE: CML)

No, not their tax fight – your own taxes in the odd-lot and specific offer

Coronation has finalised the offer price for the odd-lot offer (for those holding fewer than 100 shares) and specific offer (up to 500 shares). The price is R33.6191281, which is a 10% premium to the 30-day VWAP.

The very importance nuance here is the tax, as the offer is structured as a dividend. If you’re subject to dividends tax (e.g. an individual holder), this is almost certainly worse for you than selling shares in the market. If you hold through a company and hence don’t pay dividends tax, then this is likely to be a better outcome than selling in the market.

Please consider the tax carefully in making a decision here and speak to your tax advisor. This is more complicated than a normal offer structure.

The other very important nuance is that the odd-lot offer is something you have to opt out of i.e. the default is to accept it. The specific offer needs you to opt in i.e. the default is to have rejected the offer. Please read the circular for full details.


Little Bites:

  • Director dealings:
    • An associate of JD Wiese (son of Christo) bought shares in Shoprite (JSE: SHP) for just over R1 million.
  • NEPI Rockcastle (JSE: NRP) allowed shareholders to choose whether to receive a distribution as a cash dividend or a capital repayment. It mainly comes down to taxation consequences. In case this interests you, 37.1% of holders chose the cash dividend and 62.9% chose the capital repayment (the default).
  • Oando (JSE: OAO) has finalised its 2022 financial statements at long last. The company will now get the interims and final statements for 2023 done. The board has committed to publishing these financials by the end of July 2024.

Ghost Bites (MC Mining | MultiChoice | Sasol | Sirius)

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



Goldway has declared its MC Mining offer unconditional (JSE: MCZ)

There is yet another twist in this tale

The MC Mining soap opera continues, with bidder Goldway announcing that it has in fact met the minimum acceptance condition. This means that holders of at least 50.1% of ordinary shares in MC Mining (other than those already held by Goldway) have accepted the offer.

This is going to come as a surprise to the MC Mining board based on their recent communication (and of course the recommendation they made to shareholders not to accept the offer). To further increase the acceptances , the offer has been extended by 10 business days for acceptance until 11am South African time on 22 April.

MC Mining was unhappy about the extension that they believe came as a surprise. As Goldway very smugly points out, the intention was always to extend the offer once the minimum acceptance condition was met. MC Mining just wasn’t expecting the condition to be met.


MultiChoice announces the terms of the Canal+ mandatory offer (JSE: MCG)

The offer price of R125 is well above the required mandatory offer price

The MultiChoice – Canal+ journey has been interesting. The firm intention announcement by the group includes the timeline of events, starting in February 2024 with Canal+ announcing that it wanted to make an offer of R105 per share. MultiChoice rejected that offer, as the board believed that the price undervalued the group.

It was a brave strategy, but it worked. After Canal+ acquired more shares in the market and triggered a mandatory offer at R105 per share, the parties negotiated further and decided to propose a price of R125 to shareholders. It’s still a mandatory offer, but at a price higher than the minimum regulatory requirement of R105 per share based on the trading history of Canal+ in MultiChoice shares.

This avoids a silly and expensive situation of a mandatory offer followed by an offer at a higher price. It seems like a win for all concerned.

Canal+ currently holds 36.6% of MultiChoice shares in issue and is allowed to buy more shares while the offer is live, provided they don’t pay more than R125 per share or the offer price will need to be increased to whatever the higher amount is.

The very important thing to note is that this is being structured as a mandatory offer rather than a scheme of arrangement. This isn’t an expropriation mechanism that binds all holders to the outcome of a vote that needs 75% approval. Instead, the squeeze-out provisions may apply, which allow Canal+ to force a 100% acceptance provided 90% of holders say yes to the offer.

It is therefore highly likely that MultiChoice will remain listed on the JSE, as achieving a 90% acceptance rate is no joke. There’s potentially a much more interesting outcome here, as the parent company of Canal+ (Vivendi) is considering a split into various entities. If this happens, it seems that Canal+ might be available for a separate spin-off and merger with MultiChoice, which would suddenly create a far more interesting media and entertainment group with a seriously impressive footprint.

The circular to shareholders is due by 7 May 2024 and should make for very interesting reading.

Personally, with no financial horse in this race, I would love to see a MultiChoice – Canal+ merger. It would give local investors the opportunity to hold shares in a proper media powerhouse. I bet there would also be further benefits for the local film industry.


Great for Sasol, perhaps not great for your lungs (JSE: SOL)

This is going to upset the environmental groups

Investors in Sasol have had to stomach a situation where the longevity of Secunda Operations has been in doubt because of environmental concerns. Naturally, environmental groups would love to see the back of this thing, although that would lead to far more boring Sasol AGMs with less disruption. Investors with a purely financial lens just want to see Sasol return to a financially appealing position, with the share price having lost more than a third of its value in the past year.

The right approach, as is so often the case, is probably somewhere in the middle. This is why regulators exist, as they need to balance the needs of all stakeholders. There is always an economic cost that has to be balanced against environmental costs. Sadly, the trade-off is air quality vs. loss of jobs. There are no easy decisions here.

The major recent scare for Sasol was the National Air Quality Officer (NAQO) refusing Sasol’s application to be regulated on an alternative emission load basis for the boilers at Secunda Operations. Sasol’s argument is that they are working hard to reduce the environmental footprint, but shouldn’t be measured against the concentration-based limits.

The Minister of Forestry, Fisheries and the Environment has upheld Sasol’s appeal after the NAQO said no. Load-based limits will be applied from 2025 until 2030.

You can read the full appeal decision here, with this as just one interesting extract dealing with Sasol’s grounds of appeal. It clearly shows how the trade-offs mentioned above come into play:


Sirius makes more progress on its portfolio (JSE: SRE)

This group isn’t shy to do deals

There are many property funds on the JSE that seem to do deals for the sake of it, paying market value for properties and selling at market value as well. That doesn’t really do much to create shareholder value, let’s be honest.

Sirius is more interesting than that. Although I’ve commented many times on how silly the valuation got during the pandemic, that wasn’t a negative reflection on the management team. If anything, the market simply got too carried away.

To help justify the valuation, Sirius tries hard to acquire properties at appealing prices and to dispose at strong prices as well. The group previously announced acquisitions in both Germany and the UK with a total value of over €100 million. These four deals have now been completed. They were paid for with the proceeds of the November €165 million capital raise.

Separately, Sirius has completed the sale of a light industrial asset in Stoke-on-Trent in the UK for £3 million. It’s a small transaction for a non-core asset, with the price set at a 1% premium to the last reported book value.

The share price is up 30% in the past year. Here’s the pandemic craziness I was talking about, clearly visible in this five-year chart:


Little Bites:

  • Powerfleet (JSE: PWR), the newly merged group with MiX Telematics, has gotten its locally listed life off to a complicated start thanks to accounting rules. The group needs to restate the accounting treatment of convertible preferred instruments. This will require restatement of financials for the 2021 and 2022 financial years as well. This has non-cash impacts on the financials. Still, it makes the group late in filing its annual report, which earned the company a warning letter from the Nasdaq giving it 60 calendar days to respond. They definitely need to get this sorted in the required time period, as a listing suspension is not the way to win the trust of investors.
  • To give you an idea of the cost of borrowing for sub-scale REITs in Europe, Deutsche Konsum (JSE: DKR) is issuing subordinated secured convertible bonds in euros. The repayment date is October 2025, so this is very short-term money where the convertibility into shares is important. They pay interest at 12% per annum and with an issue price of 98.5% of the nominal amount, the effective rate is actually slightly higher. Compare this to the yields on properties and you’ll see the problem.
  • Four non-executive directors have resigned from Ellies (JSE: ELI), so things are going from bad to worse there it seems.

Emus with Guerrilla Tactics

Is violence always the answer? If you consider the fact that the Australian military once went to war with the native emu population (and lost), then the answer to that question is no, probably not.

Disclaimer: gentle reader, most times when I sit down to write this column, I do so with the aim to inspire a fresh perspective on business or finance, or to draw your attention to an interesting story with a relevant lesson. This article, however, has been written purely for the purposes of unabashed glee. You will probably learn nothing useful from this article, but you will come away with one very entertaining dinner table story. 

Our story begins at the end of World War I

Australia’s involvement in the First World War had marked its most catastrophic conflict to date, with casualties exceeding those of the Second World War that would follow. 

Approximately 210,000 Australians were affected, with 61,519 fatalities or deaths resulting from injuries. Given the nation’s population of less than five million at the time, these losses were severe. Numerous veterans returned home with incapacitating injuries, hindering their ability to secure employment.

Under mounting public pressure to assist returning veterans, the Australian government devised a dual-purpose solution: they would offer employment to veterans and contribute to the nation’s food supply at the same time. The strategy involved dividing the countryside into small parcels of land, encouraging veterans to take up farming. 

Despite the enthusiasm of many thousands of veterans who accepted the challenge, the endeavour was fraught with difficulties from the start. The soil quality was generally poor, vermin posed a constant threat and most veterans lacked even basic farming experience. Furthermore, the allotted plots, which were typically around 10 acres each, proved inadequate for sustenance, let alone profitability. Nonetheless, numerous veterans were resettled across the country as part of this initiative.

Around 5,000 veterans were settled in Western Australia, where wheat was the crop most suitable to the conditions. 

From bad to worse

By the mid-1920s, it became obvious that the veteran farming initiative was a terrible idea. Tens of thousands of farmers were plunged into poverty while struggling to produce even a meagre amount of food.

Under such dire circumstances, alcoholism and suicide rates soared. Throughout the decade, wheat prices collapsed, exacerbated by the 1929 American stock market crash, which precipitated the Great Depression in Australia (and worldwide) with devastating effect. Suddenly, already diminished wheat prices halved, and Australia’s unemployment rate surged to 32%. As if that wasn’t enough, a drought compounded the hardships. 

A quarter of the resettled farmers in Western Australia abandoned their plots in frustration. Those who remained had no idea that their greatest hardship was still to come. 

Enter 20,000 emus

Imagine being a novice farmer, trying your best to grow wheat in the unforgiving landscape of Western Australia. You’ve persevered through a steep learning curve, bad soil, a freak drought and empty promises of subsidies that never came. And then one morning you wake up to find your wheat fields covered in emus. 

For those who are unfamiliar with emus, these are large flightless birds that are native to Australia. They have a similar look and build to the ostriches that we know so well, except that they are slightly smaller. Historically, Australia has had a bit of a love-hate relationship with the emu, alternating between classifying them as a protected species and vermin (probably depending on how much damage they were causing in a given period). 

Driven by the drought, increasingly large flocks of emus were migrating to Western Australia, where they found themselves in stiff competition for resources with struggling farmers. They caused so much damage to wheat crops that by 1922, their protected status was once again dropped, and the government classified them as vermin to be exterminated. Farmers took matters into their own hands but failed to make a dent in the emu numbers, as the birds were so hardy that they needed to be shot multiple times before they would die. 

Running low on ammunition and patience, the farmers turned to the government, who decided now was the time to involve the military. 

Bring in the big guns

A group of former soldiers was dispatched to meet with Sir George Pearce, the Minister of Defence. Drawing from their experiences in World War I, these veterans understood the efficacy of machine guns and requested their deployment. Pearce readily agreed, and military involvement was slated to commence in October 1932. The operation was overseen by Major Gwynydd Purves Wynne-Aubrey Meredith of the Royal Australian Artillery’s 7th Heavy Artillery, who commanded Sergeant S. McMurray and Gunner J. O’Halloran. Armed with two Lewis guns and 10,000 rounds of ammunition, they went off to war.

Assisted by local farmers, they endeavoured to corral the emus into an ambush. However, contrary to their expectations, the birds didn’t flock together but instead scattered, evading easy targeting. Later that day, when they encountered a small group of emus, the soldiers made another attempt, yet with no better outcome. Two days later, Meredith and his team meticulously laid an ambush near a dam. They lay in wait as approximately 1,000 emus approached the water. At close range, the soldiers opened fire, but the Lewis machine gun jammed after a few rounds, allowing the emus to flee with minimal casualties.

Getting an accurate assessment of the emu casualties was another challenge, as many would flee into the bush before succumbing to their injuries. By the third day, only about 30 emus had been killed, hardly making a dent in the estimated 20,000-strong population. Subsequent days saw limited success as the emus adapted their tactics, splitting into smaller groups with lookout individuals while others continued their ravaging. Meredith and his men attempted to mount the Lewis machine gun on a truck, but the rough terrain hampered their efforts, rendering that plan ineffective.

Amidst mounting negative publicity and lacklustre progress, Meredith and his team were withdrawn from the operation on November 8. The official report cited approximately 300 emus killed during the campaign.

Summarising the first offensive of the war, ornithologist Dominic Serventy commented: “The machine-gunners’ dreams of point blank fire into serried masses of emus were soon dissipated. The emu command had evidently ordered guerrilla tactics, and its unwieldy army soon split up into innumerable small units that made use of the military equipment uneconomic. A crestfallen field force therefore withdrew from the combat area after about a month.”

An astonished Major Meredith compared the emus to Zulu warriors, proclaiming “If we had a military division with the bullet-carrying capacity of these birds it would face any army in the world. They can face machine guns with the invulnerability of tanks”.

A victory of sorts

Following the military’s withdrawal, emu crop raids persisted. By November 12, the Minister of Defence authorised a renewed military effort, and Major Meredith was sent back into the field.

Initial progress was seen over the first two days, resulting in approximately 40 emus killed. However, the third day, November 15, saw a significant drop in success. Nonetheless, by December 2, soldiers were averaging around 100 emu kills per week. Meredith was recalled on December 10, and in his report, he documented 986 confirmed kills using 9,860 rounds, equating to precisely 10 rounds per confirmed kill. Additionally, Meredith reported that exactly 2,500 wounded emus had succumbed to their injuries. 

The exactness of his numbers hints at over exaggeration, but even so, using more than 10,000 rounds of ammunition to kill less than 3,500 (flightless) birds hardly feels like a sweeping victory. 

Despite the challenges faced during the culling operations, farmers in the region once again sought military aid in 1934, 1943 and 1948, only to have their requests denied by the government. Instead, the bounty system implemented in 1923 remained in place, and its effectiveness became evident: over a six-month period in 1934, 57,034 bounties were claimed. The larger issue was eventually resolved with the implementation of stronger barrier fencing, effectively preventing emus from entering farmers’ fields.

Although no emus were present to endorse the agreement, a truce was officially declared in 1999, when emus were once again designated as a protected species. Despite the eventual effect of their numbers, the emus are widely regarded as the victors of the Great Emu War of 1932.

And you thought that the spiders were the most frightening things in Australia, didn’t you?

About the author:

Dominique Olivier is a fine arts graduate who recently learnt what HEPS means. Although she’s really enjoying learning about the markets, she still doesn’t regret studying art instead.

She brings her love of storytelling and trivia to Ghost Mail, with The Finance Ghost adding a sprinkling of investment knowledge to her work.

Dominique is a freelance writer at Wordy Girl Writes and can be reached on LinkedIn here.

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