With South Africa Inc stocks firmly back in fashion and last year’s tilt by BHP at rival Anglo American still fresh in investors’ minds, could 2025 be the year of vigorous moving and shaking on the JSE?
In terms of deal-making and corporate action, the year got off to a rollicking start. Last week’s big deal was far removed from South Africa Inc when the Rupert-controlled investment counter Reinet relinquished its long-held stake in cigarette maker British American Tobacco (BAT).
But closer to home was news that energy giant Sasol is weighing up options to reinvigorate its chemicals segment, which includes the sprawling Lake Charles facility in Louisiana. In an interview with Bloomberg, CEO Simon Baloyi mentioned the possibility of an IPO for the chemicals segment. That has put a match to Sasol’s share price in the past few days. A separate listing, one suspects, might only be a medium-term consideration.
Then there are the renewed rumours of a tie-up between mining giants Rio Tinto and Glencore. This revives the idea of another bid by BHP for a new-look Anglo American, where CEO Duncan Wanblad is in the throes of a radical restructuring.
In another sizeable transaction, private hospitals group Life Healthcare sold its stake in Life Molecular Imaging to Lantheus for almost R14bn — a meaningful bit of manoeuvring, considering the group’s total market value of R23bn.
There’s some obvious stuff pending too. Will liquor giant Campari convince Remgro to sell its high-end Scotch business, Capevin? However, perhaps looming larger in Remgro’s life is whether the competition authorities can be persuaded to green-light a merger between the fibreoptic interests of Maziv and Vodacom.
Aveng has already suggested splitting its remaining businesses, the Australia-based McConnell Dowell and South Africa-based mining services group Moolmans. There have been similar calls for Metair regarding its automotive and battery technology businesses. Is City Lodge, which has had some interesting changes to its share register in the past two years, a takeover target? Is packaging group Nampak being dressed up for a sale? Is chemicals and explosives group AECI in the firing line?
Will investment company Ethos accelerate its portfolio unwinding? Will Brait unbundle its holding in consumer brands group Premier (which itself must do more to diversify from its bread core), and so leave fitness chain Virgin Active as a standalone listing on the JSE and London Stock Exchange (LSE)? Will Bell Equipment — which has experienced increased trading volumes of late — be subject to another buyout offer? Could Bidvest see value in buying out its pharmaceuticals subsidiary, Adcock Ingram? Could African Rainbow Capital Investments — and other shareholders — opt to list fast-growing TymeBank?
Even though the idea was scotched at an AGM last year, there remains some eagerness for investment company Hosken Consolidated Investments to separately list its energy subsidiary, Impact Oil and Gas. This entity has participation rights in some promising Namibian offshore oilfields, as well as strategic and potentially lucrative gas options off the Eastern Cape coast (which are being vigorously opposed by environmentalists).
There is a good chance of more action from Naspers/Prosus under energetic new CEO Fabricio Bloisi, following the successful IPO by Indian on-demand convenience platform Swiggy.
Then there is the intriguing prospect of seeing what Anglo American can do with De Beers. An unbundling and separate (re)listing of this iconic mining and marketing business on the JSE and LSE would be fascinating, considering the flawed state of the global diamond market.
Whether investors should be more optimistic about new listings activity in 2025 is debatable. The JSE is making a concerted effort to simplify and encourage listing applications.
It’s clear from the strong sentiment for new listings — such as Premier, specialist retailer Boxer and tech-driven car dealer WeBuyCars — that investors have an appetite for counters with decent longer-term growth prospects. Are there others that would mull listing?
There are not huge hopes that private equity (PE) and venture capital (VC) activity will feed into the JSE.
Tshepiso Kobile, CEO of the Southern African Venture Capital & Private Equity Association, says the regional private capital market showed some resilience in the past year after record levels of fundraising by PE firms in 2023.
But Kobile notes that exits remained a challenge — despite reaching their highest levels in five years during 2023 (R21.3bn) — and that to unlock the potential of private capital in Southern Africa, sustained political stability and effective policy implementation are critical. “The momentum introduced by the GNU offers a valuable opportunity to build investor confidence, but execution will be key to maintaining this optimism.”
If VC and PE investments provide some pointers for potential JSE activity, Kobile highlights that the energy sector remained a focal point for PE investment in 2024, driven by structural reforms and the region’s transition to sustainable energy. On the VC front, she says fintech, software and e-commerce continued to attract significant investment. “Globally, emerging areas such as cleantech and biotech have started to gain traction, signalling potential opportunities for local adaptation.”
Kobile says AI is also set to disrupt traditional industries in Southern Africa. “While its growth may be constrained by the availability of capital, the technology’s transformative potential cannot be overlooked.” She reckons green hydrogen production and infrastructure development present promising opportunities for institutional capital to drive sustainable growth.
The obstacles to deal-making remain regulatory challenges, which can add to the complexities in making an acquisition premised on rightsizing business units and selling off noncore operations. Arguably the most frustrating issue is the broader mandates accorded to the competition authorities.
One market veteran remarks: “I remember, many years back, [Bidvest founder] Brian Joffe complaining that it took four months to complete a deal. Now it can be more like four years.”
Some large deals that required the stamp of the competition authorities have endured costly delays — including PepsiCo’s takeover of Pioneer Foods, the PE buyout of Burger King from Grand Parade Investments (GPI) and the Maziv and Vodacom fibreoptic merger. More recently, the proposed takeover of casino group Peermont by rival Sun International was given the thumbs-down.
Not only can there be frustrating delays — several years in the case of Vodacom/Maziv — but there can be an insistence on additional new investment and commitments to job retention and creation. These can markedly change the economics of the original deal.
There are other issues that might stymie deal-making.
Charles Boles, founder and manager of Titanium Capital, points to the theme of underinvestment in South Africa. “It’s a bit like a scorpion … the pain is coming at the back-end. I think you have a number of businesses that are underinvested, and in terms of capital being deployed I would not be surprised to see the priority being given to capital projects rather than M&A [mergers & acquisitions].”
In this regard, Tiger Brands recently committed to a new large bakery operation, and cement group PPC will be setting up a new plant in the Western Cape.
Boles adds that institutional investors are clearly becoming uneasy about the size of their investable universe. “There was a time when you were approached by investment banks and the pitch was: ‘We are going to make an offer and give you the liquidity to exit.’ And institutions were thankful to exit. Now they are worried their investment universe is shrinking. For instance Bell Equipment, where Sanlam interestingly opposed the buyout offer and explicitly made the comment about the investable universe.”
Boles says obviously at an attractive price any deal will be done. “But there might be a tipping point coming where institutions are working out that if they don’t have an investable universe they don’t have a business.”
Here are some deals the FM would like to see in the next year:
QUANTUM FOODS: Quantum is too tightly held by too few shareholders to warrant retaining a listing on the JSE. While a delisting would seem logical perhaps — if calm heads prevail — the JSE could end up hosting a substantial poultry business. As things stand, PE company SilverStreet (which also owns other food interests), the Rudland family (which had a good look at Tongaat Hulett) and poultry giant Country Bird Holdings (CBH) are all large shareholders. So are Quantum’s management team and, more recently, parties allied to Eastern Cape poultry group Sovereign Foods. With clear animosity between some of these, it’s unlikely that everyone is going to get around the table for a pow-wow. But perhaps a diplomatic investment banker could promote the merits of a three-way merger between CBH, Sovereign and Quantum. In truth, the latter two seem likely to perch in a bigger nest — but with CBH in the mix, the JSE would have a poultry listing with the operational and geographic span to compete more effectively against bigger birds such as Rainbow Chicken and Astral Foods.
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HULAMIN: Aluminium group Hulamin was in the sights of a larger international rival a few years ago, but lengthy negotiations fizzled out. The group — still not convincingly profitable on a sustainable basis — now has an activist shareholder with considerable industry knowledge breathing down management’s neck. The emergence of “metal man” Volker Schütte as a significant minority shareholder will, if anything, ensure that any strategic foibles or operational feet-dragging are aired publicly. And he is not going away, having promised to double his stake, and then double it again until management listens to him. Whether this makes the comforting embrace of an international competitor more attractive for Hulamin remains to be seen. There is a view that interest in Hulamin from potential buyers has subsided — despite the marked increase in demand for aluminium canning. Hulamin’s market value measured against the replacement cost of its production facilities is, on paper, an outright bargain for a global competitor keen on snapping up extra market share.
ADVTECH: Things have been going pretty well for private education business AdvTech ever since an audacious hostile bid from upstart rival Curro some years ago — which was staved off — motivated leadership to take a more aggressive growth tack. There can’t be too many unhappy shareholders at AdvTech, whose share price has soared more than 200% in five years. But there is always room for improvement, and when you have a shareholder such as Value Capital Partners on board, there might be an incentive to work harder for even better returns. The conspicuous drag on AdvTech is its resourcing (and training) segment — which, at a stretch, has only a slight strategic fit with the more profitable schools and tertiary education hubs. The uneven longer-term performance from the resourcing segment detracts from the core education businesses, which have proper moats. What’s stopping AdvTech? Perhaps finding a buyer for what is a sprawling resourcing segment that is almost certainly too large for either listed counters Primeserv or Adcorp to consider. (With The Finance Ghost)
ARGENT INDUSTRIAL/TRELLIDOR: Argent now earns the bulk of its profits from a cluster of specialist engineering businesses in the UK. The group has been open about securing a listing on the LSE — most likely via a reverse-listing. UK investors would probably not be terribly interested in Argent’s South Africa-based businesses, which include fireplace maker JetMaster, Castor & Ladder and security products business Xpanda. Separating the UK and local businesses could leave the latter open to corporate action to bulk up and diversify operations. Listed safety products group Trellidor might make an obvious and interesting target for Argent — though the domination of the local security products sector might draw the ire of competition authorities. Perhaps a more inspired deal is for Argent to look at an arrangement with Remgro’s aluminium door and window business Wispeco, which has been a perennially profitable performer and represents just a sliver of the investment giant’s intrinsic value.
TIGER BRANDS: Perhaps it’s too early in the tenure of new CEO and sector veteran Tjaart Kruger to contemplate sweeping corporate action at Tiger Brands. There has been some determined portfolio tweaking and, more recently, a commitment to boost the baking division’s capacity and efficiency. Gut feel, though, is that Tiger won’t be mulling too many small bolt-on acquisitions with its already commanding market presence across a range of food and beverage categories. In terms of a big acquisition there can’t be much to look at locally except AVI — and specifically AVI’s snacks and beverages segments, which would give Tiger another handful of brands with dominant positions on supermarket shelves. What could put a damper on any such advance would undoubtedly be the competition authorities, as well as the likelihood that AVI (which had international food business Mondelez sniffing around before the pandemic) would want top dollar.
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GAMING: While most attention is still focused on Sun International’s tilt at unlisted rival Peermont (a deal that currently does not have the backing of the competition authorities), there may be an overdue push for scale by smaller gaming groups Goldrush and GPI. Goldrush has seen its previous sweet spots in limited-payout machines (LPM) and electronic bingo go ex-growth, and there is now a concerted effort to build a niche in the fast-growing online sports betting sites. GPI is anchored by its significant minority share in the GrandWest casino in Cape Town and a 30% holding in LPM operator Sun Slots — but the group has ambitions to broaden its gaming reach with racinos (based on historical horse racing data). Whether there are mutual attractions between GPI and Goldrush remains to be seen. In the meanwhile, casino giant Tsogo Sun, which has fallen well behind in the online gaming race, might easily start taking an interest in either of the two.
KAROOOOO: Karooooo, the owner of the Cartrack vehicle tracking and fleet management brand, looks like it has enough growth fodder on its plate, especially in the vibrant Southeast Asia market, to keep it from veering down the M&A avenue. In recently released quarterly results, Karooooo took the time to remind us that it followed a “prudent and strategic approach” to M&A. “We view M&A as a tool to accelerate time-to-market in key geographies, expand our product portfolio, or strengthen our competitive position.” The group reiterated that its compelling organic growth profile, customer-centric culture and attractive unit economics meant a high bar was set for any acquisitions. There have been market mutterings around Karooooo setting its sights on Altron’s Netstar business, which has badly lagged Cartrack in recent years. Such a deal would ensure a commanding South African market share for the combined entity but not substantially expand Karooooo’s geographic spread. Lately, there have been (possibly wishful) whispers that Karooooo should rather look at taking the steering wheel at SA Taxi, the business that caused the old Transaction Capital to slide into the ditch.
BRIMSTONE: Enduring empowerment company Brimstone holds the key to what could be an inspired food sector transaction involving fishing assets. Brimstone owns roughly a quarter of Sea Harvest and is the dominant shareholder in Oceana. These two investments represent the bulk of Brimstone’s investment portfolio, and the obvious transaction would be to simply unbundle both to shareholders. What is jamming up the value unlock is that Brimstone sits with a fair slug of debt — certainly enough to preclude unbundling both Sea Harvest and Oceana. A left-field option is for Brimstone to push for a merger between Sea Harvest and Oceana — creating a compelling fishing enterprise that spans hake, pilchards (including the Lucky Star brand), horse mackerel, fishmeal and fish oil as well as aquaculture, not to mention international interests in the US and Australia. Being punted as a black-controlled African fishing champion with global scale might placate competition authorities and allow Brimstone to sell down its stake (to other BEE entities), pay down its debt and unbundle shares in the enlarged group to its shareholders.
HOMECHOICE: This catalogue retailer — using its clients’ well-established credit histories — has been rejigged as a fast-growing financial service and fintech business. Not that the market has cared much for the story as Homechoice trades on a modest p:e of eight and a yield of more than 5% — rated lower than most of the JSE’s retailers and well below the multiples offered for fintech stocks on international bourses. It might be tempting for the major shareholders to take Homechoice off the JSE and spend a couple of years boosting profits before looking for a listing on an international bourse. Or might there be a more interesting alternative in a retail counter such as Pepkor — which holds substantial offerings in cellular services and financial services — buying out Homechoice? For one thing, both companies have a long history of successfully tapping the lower end of the consumer market. Pepkor could provide the financial muscle, and additional client base, to take Homechoice’s financial services and fintech offering up a few notches.
PREMIER: Premier has been the standout performer on the JSE’s food board over the past 12 months. It is thriving largely thanks to its strong position in the bread market, where its Blue Ribbon brand has a commanding presence on supermarket and convenience store shelves. There are several places Premier can look for additions to its portfolio, including Libstar and RFG Foods, which both still have private equity shareholders on board. Whether Premier would want all of Libstar and all of RFG seems doubtful, with the respective dairy and canned products businesses seeming to be unlikely fits. Some have suggested that RCL Foods — now without Rainbow Chicken and logistics business Vector — might be a better merger. RCL’s baking segment probably creates an unwanted overlap, but the strong position in pet nutrition and grocery brands such as Yum Yum peanut butter, Ouma rusks and Nola mayonnaise could be appetising.
COMBINED MOTOR HOLDINGS (CMH): Since listing in 1987, vehicle retailer CMH has had an impressive profit and dividend track record. CEO and major shareholder Jebb McIntosh — a man who knows a thing or two about what drives the motor industry — is now at an age (77) where most executives call it a day. The sprawling dealership network that is CMH covers almost every major vehicle brand along with the service operations and allied financial services. The group also owns a feisty car rental business that has been a star performer after Covid. Super Group, Motus and Bidvest might all conceivably be interested in grabbing CMH’s dealership network, though their enthusiasm for the car rental operations might be muted. A possible curveball could be WeBuyCars, which might be thinking of commanding a bigger slice of the vehicle park by securing (and adapting) traditional dealership models for used and new vehicles.
REMGRO: Remgro has restructured its portfolio to give a distinct bias to large unlisted investments such as Mediclinic International, Heineken Beverages, Maziv, industrial gases business Air Products and food group Siqalo. However, this has not helped to narrow the discount the market applies to the intrinsic value of the investment portfolio. Perhaps more work is needed? Merging consumer brands subsidiary RCL Foods with spreads business Siqalo is a logical next step. Certainly, there are also noncore interests that need sorting — stuff that isn’t moving the needle of Remgro’s sprawling portfolio and never will. Smaller investments such as Wispeco, the influential stakes in small business developer Business Partners and free-to-air broadcaster eMedia, as well as portfolio holdings in financial services groups Discovery and FirstRand and the legacy holding in BAT, should surely be sold off sooner rather than later. In the unlikely event of the Vodacom-Maziv merger not passing muster, the proceeds from the sale of small and noncore assets could come in handy for growth funding. Of course, old market watchers know that the deal cogs do grind slowly at Remgro, which is, history shows, not always a bad thing.
EXXARO: Sometimes it’s the deals you don’t do. Exxaro Resources plans to spend R12bn in cash on a diversification strategy that, according to (suspended) CEO Nombasa Tsengwa, will be in South African manganese, a steel feed ingredient. Better to double down on thermal coal, where Exxaro already has marketing expertise as well as local operating dominance. The group has major resources left in its local portfolio. Or it could take a leaf out of rival Thungela Resources’ book and cast about for an unloved, operating thermal coal mine offshore. Thungela has shown there are opportunities, especially in developed economies, where diversified mining companies are under pressure to rid themselves of unpopular coal at potentially competitive prices. In any event, coal’s reputation is improving amid energy security concerns. In a Trumpian world, fossil fuels of all stripes will most likely be able to dust themselves off. Coal demand, forecast to peak at 1-billion tons, is now expected to be resilient given its use in China and India. As for manganese, it’s a metal renowned for price volatility, while buying into a bulk miner in South Africa doubles up Exxaro’s exposure to troubled ports and rail firm Transnet. (With David McKay)
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