The mournful tolling of more delistings rings across the JSE. This week Bell Equipment — after so much conjecture in the past few years — finally pitched a tempting buyout offer to minority shareholders. Only a few hours after Bell’s clanger, financial services boutique Sasfin mooted a R30 a share offer to buy out its minority shareholders.
Sasfin has had its challenges, corporate restructurings and controversies of late. Perhaps being out of the public eye might be prudent in terms of swiftly and decisively dealing with any remaining issues. The company was one of the handful of new listings — along with Spur, Bowler Metcalf, Grindrod, Transpaco and Combined Motor Holdings — that rushed the market in the heady days of 1987 and endured profitably for the long term.
Under the circumstances, I suspect Sasfin minorities might welcome a buyout offer. There are certainly other good-value financial services boutiques to peruse on the JSE. That said, Sasfin will allow shareholders to remain on board the unlisted entity.
Bell came to market a bit later, in the mid-1990s. But it will still be sad to see one of the more intriguing small-cap industrial counters head for the exits — especially a counter steeped in local ingenuity and invention. Bell’s “yellow assets” are well regarded across several industrial applications worldwide.
Unlike the previous, and controversial, tilt at a buyout, it’s difficult to see too many minority shareholders turning their noses up at the latest offer. The pitch price is slightly below the last stated NAV, but only the most curmudgeonly investor would carp about being short-changed in view of the recent share trading history. In fact, you’d need to scroll all the way to 2007 to find Bell’s shares trading at a price higher than the latest buyout offer tag. The offer is also a far cry from the desultory pitch that followed the buyout of US agricultural equipment giant John Deere’s significant stake in Bell about four years ago.
Bell’s pending departure from the JSE could, of course, be superseded by even larger developments if rumours around an offer for long-standing industrial giant Barloworld carry any truth. Barloworld has been under cautionary since April, and the FM suggested recently that an influential shareholder, Saudi group Zahid Tractor & Heavy Machinery, might be mulling a buyout offer.
Interestingly, on Monday — when Bell led the small-cap charge after its buyout offer was tabled — there were several other small-cap movers that might easily be tipped as buyout targets considering modest earnings multiples and substantial discounts to intrinsic NAV. These include agricultural group Crookes Brothers, York Timber, EOH, Metrofile, Grindrod Shipping, Trellidor and Mustek. With load-shedding suspended for a prolonged period (touch wood), a hopeful political dispensation and possibly an interest rate cut on the horizon, there might not be a better time to snaffle overlooked and undervalued assets.
These entities get diluted from syrup to sugar water
Speaking of possible bargains, I did not see much (if any) media coverage on the detailed recapitalisation plan for debt-laden sugar group Tongaat Hulett. I suppose once a company slides into business rescue there is a sense of closure — even though business rescue is not necessarily a death knell (see Brikor) for shareholders.
In any event, the Vision consortium — a collection of companies associated mainly with the enterprising entrepreneur Robert Gumede — still believes the sugar and property segments of Tongaat hold meaningful value. Vision has, as expected, opted to convert a hefty slab of its acquired Tongaat debt of R8.5bn into equity. So, about 4.9-billion shares will be issued to Vision at about 101c a share — which is well off the 404c that the group’s shares were trading at when suspended on the JSE in early 2022.
What this means is that entities aligned with Vision will end up owning 97.3% of Tongaat Hulett. Tongaat’s largest shareholders at the time of the share’s suspension were the Public Investment Corp (PIC) with 16.6%, active fund manager Artemis with 14.8%, Braemar Trading (reportedly associated with Zimbabwean tobacco barons the Rudland family) with 9.8% and PSG Investment with 7.8%. These entities get diluted from syrup to sugar water.
Ultimately, the existing Tongaat shareholders will retain a collective interest of about 2.7% after the share issue to the Vision consortium. This means the four biggest shareholders in the “old” Tongaat group will see their respective shareholdings whittled down, in percentage terms, to fractional holdings.
Now, the Tongaat circular around Vision’s proposed equity subscription makes it abundantly clear that the intention — despite the huge shift in ownership concentration — is to retain the group’s status as a listed entity. But the circular also concedes that it’s possible the equity issues could trigger a potential mandatory offer to minority shareholders.
I’m not sure what appetite the likes of the PIC and PSG will have for remaining on as greatly diluted shareholders in a recapitalised Tongaat. It could take many years and many risks for existing shareholders to salvage their original investment in Tongaat. Then again, bailing out at 101c a share will leave the bitterest tang imaginable.
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