AECI announces a few asset disposals (JSE: AFE)

This includes the sale of Schirm USA to its management team

AECI is in the process of simplifying its group and focusing on AECI Mining and AECI Chemicals, which means they are selling everything else unless there are obvious synergies. The market tends to like this kind of thing, as groups with unfocused portfolios are often underperformers. This is why AECI closed 5.5% higher after announcing a few disposals.

The major disposal is Schirm U.S.A. that they are selling to the management team on that side of the pond. Management’s special purpose entity for the acquisition is called Liberation Chem-Toll and they are in Texas, so the stars and stripes are all over this thing. Despite having net assets of R994.5 million as at December 2024, attributable profit was a very sad R9.4 million.

Somehow, AECI managed to sell it for R1.074 billion, a price that probably reflects an uptick in net assets in the past six months. It’s an insane earnings multiple and I’m pretty sure that the AECI execs had to be careful not to rip the counterparty’s arms off when shaking hands for the deal, such is the exuberance.

R716 million is in cool, hard cash. The remaining R358 million is in the form of seller notes, a structure that is more common overseas than in South Africa. Basically, the seller agrees to be paid over a period of time, with the legal form being a promissory note. Deferred payments are common here, but we don’t usually see reference to some kind of promissory note. There’s also an adjustment of up to R72 million for working capital changes.

There are a few conditions that need to be met, but this is a small deal by US standards and there’s no nonsense here in terms of difficult regulatory approvals.

That’s not all, folks.

AECI also announced that Schirm Germany found buyers for Baar-Ebenhausen, one of the three key facilities in the German business. It focuses on formulation, filling and packaging operations for agrochemicals and specialty chemicals. This is one of those “pay them to drag it away” situations, with Schirm Germany transferring €500k to cover environmental liabilities and benefitting from a saving of €3 million on future restructuring and other costs.

And finally, AECI has found a South African buyer for the local food and beverage business. This must be a small deal, as they purely mention the disposal on a voluntary basis and they don’t really give further details.

Here’s the big that investors will want to keep an eye on: AECI notes that they are “satisfied” with their current debt levels and business performance and have “begun exploring inorganic growth opportunities” – I’m not sure that jumping straight into new acquisitions is what the market will want to see.

Redefine sells Rosebank Corner (JSE: RDF)

Weak office leasing prospects mean that a residential conversion is coming

This is a small deal, but an interesting one nonetheless. Redefine is selling Rosebank Corner on Jan Smuts Avenue for R80 million. They will use the proceeds to repay debt. But what makes this worth looking at is that the property will be rezoned for residential purposes and that this rezoning is what will trigger the effective date for the deal.

The value on Redefine’s balance sheet as at February 2025 was R91.5 million, so the disposal price is quite a discount. This is because of the residential conversion costs, as the original valuation assumed that the property would be successful in its current form i.e. as an office.

So, this tells us that the office market still has serious problems, especially in Joburg.

There’s also a related party angle to the deal, as one of the independent non-executive directors of Redefine is the sole director of the purchaser and a minority shareholder in its holding company. The deal is so small for Redefine that even the related party angle doesn’t trigger any additional disclosure or approval requirements.

Nibbles:

• Director dealings:
  • Here’s an unusual one: Hendrik du Toit bought shares in Ninety One plc (JSE: N91) worth just under R7 million and sold shares in Ninety One Limited (JSE: NY1) worth R14 million. So that’s not just a reshuffling of geographical entry point into the dual-listed structure, but a net sale of shares.
  • Two executive directors of Emira Property Fund (JSE: EMI) received share awards and sold the whole lot worth over R6.6 million.
  • A non-executive director of Richemont (JSE: CFR) bought shares worth just over R1 million.
  • The CFO of Spear REIT (JSE: SEA) bought shares worth R102k.
  • The CEO of Vunani (JSE: VUN) bought shares worth R32k.

• Trencor (JSE: TRE) has now received the JM12 certificate from the Master of the High Court, which means that the special dividend and delisting of the company can now go ahead. The listing will be terminated on 5 August.

• Acsion (JSE: ACS) is no longer trading under a cautionary announcement, as discussions regarding a potential acquisition have been called off.

• Primary Health Properties (JSE: PHP) confirmed that they’ve repaid their £150 million guaranteed convertible bonds. This is a disclosure requirement under UK takeover law, in which they are confirming that their only relevant class of securities is now ordinary shares.