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Ghost Bites (Fortress Real Estate | Karooooo | Quantum Foods | Renergen – ASP Isotopes | Southern Palladium)

The Finance Ghost
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Ghost Bites (Fortress Real Estate | Karooooo | Quantum Foods | Renergen – ASP Isotopes | Southern Palladium)

Fortress gives more details on the direct logistics portfolio in Europe (JSE: FFB)

I always enjoy presentations like these

Fortress Real Estate hosted a property tour in Poland this week, which means that institutional investors were able to see the properties in the flesh. The rest of us plebs are reliant on the online presentation, which the company has at least made available on the website.

The direct logistics portfolio in Fortress is an important part of the story, with an estimated value of completed buildings of €240 million. Recent like-for-like growth in net operating income is 3.0% and they are developing new buildings on a yield of 7.0% to 7.5%.

For those interested, the presentation focuses on the extent of the development opportunity. They’ve completed 320,409sqm of GLA and there’s a further 178,826sqm available for development across five major business parks, so there is still much growth to be unlocked there.

The Karooooo free float looks set to improve (JSE: KRO)

But the market didn’t like the news of founder Zak Calisto selling a portion of his stake

At some point, founders of companies need to liquidate a portion of their holdings and diversify. In these situations, the important thing is to consider how big the remaining stake is, as this shows the level of commitment to ongoing growth. When it comes to Zak Calisto at Karooooo, there’s no shortage of commitment.

He is selling 1.5 million shares at $50 per share, generating a lovely little payday of $75 million (or R1.35 billion). He deserves every cent, having built this company from nothing into a solid multinational group. The really incredible thing is that he will still own 17.9 million shares after this, so he’s selling less than 8% of his total holding! He will be left with roughly a 58% stake in the company.

You can’t just sell a stake of this size through on-market trades, so there are several banks/advisors who are acting as book-running managers to place the shares with large investors. There’s also the option for Calisto to sell up to an additional 225,000 ordinary shares within 30 days, which will depend on how strong the demand for the stock is.

One of Karooooo’s challenges has been relative lack of liquidity in its stock, so this should improve that situation over time.

This didn’t stop the market from throwing a tantrum though, which is either a buying opportunity or just a correction of a particularly wild recent rally. I’ll let you decide:

Another interesting move on the Quantum Foods shareholder register (JSE: QFH)

The technical definition of concert parties becomes interesting here

In South African Takeover Law, the definition of acting in concert is “any action pursuant to an agreement between or among two or more persons, in terms of which any of them co-operate for the purpose of entering or proposing an affected transaction or offer.”

Now, I’m no attorney, but this article that I found on the CDH website certainly is written by attorneys. It makes reference to acts of co-operation and even the concept of masterminding the acquisition of securities, with a fun reference to “a nod and a wink” as well.

Despite what appears to me to be a very broad definition, there are major shareholders in Quantum Foods who are adamant that they are not acting in concert.

On one side, we have Capitalworks Private Equity and Crown Chickens, a related party. On the other, we have Aristotle Africa. Now, Capitalworks and the related party have entered into agreements that will take them to a stake of 15.53% of total shares in issue. On top of this, they’ve entered into a right of first refusal agreement with Aristotle, in which the parties have granted each other such a right to acquire each other’s shares.

A right of first refusal means that if the owner of the shares wants to sell them, they must be offered to the holder of that right first. It’s not like a call option where you can force the holder to sell. The right of first refusal only does something if a decision is made to sell the shares.

These agreements, if triggered, would take the Capitalworks entities to a holding of more than 50% of shares in issue. This would of course lead to a mandatory offer for the remaining shares if they got to that level.

Now here’s the interesting part: Capitalworks has stated that they do not have an intention to make an offer to shareholders, but they reserve the right to do so in future. They’ve also said that they are not acting in concert with Aristotle and that no other agreements are in place between them.

I have zero doubt whatsoever that proper legal advice was taken here. It would’ve been an interesting legal opinion to read, as my guess is that much of the argument hinges on the parties granting each other a right of first refusal i.e. it’s not obvious which party might end up with the higher stake.

If not to facilitate a pathway to control, the agreements could also be there to prevent another major shareholder arriving out of nowhere and taking either of these parties out.

Here is the danger of speculating on potential corporate actions, with the ill-advised speculative buying in 2024 having backfired spectacularly on punters:

That share price chart is possibly the most exciting thing to have happened in the pretty little town of Wellington in the past year.

Renergen has released the ASP Isotopes circular (JSE: REN)

The structure is a scheme of arrangement with a standby offer

As you know by now from previous announcements, ASP Isotopes (which is coming to the JSE at some point this year), is looking to acquire Renergen. The preference is to do this as a scheme of arrangement, which is a mechanism whereby 75% approval ends up being binding all shareholders to the deal. If they fail to get this level of approval, then a standby offer will be triggered in which shareholders who want to sell can tender their shares to ASP Isotopes.

We’ve seen exactly the same thing play out in Barloworld, where the scheme failed and thus a standby offer was triggered. It’s common practice when the acquirer isn’t completely set on acquiring 100% or nothing.

ASP Isotopes itself is a fascinating company. The CEO was recently on Unlock the Stock (video below for those interested), although absolutely zero mention was made of Renergen (not even a small clue!) as this was before the news of the deal broke. It’s a great opportunity to learn more about ASP Isotopes:

There are a number of reasons given for the deal in the circular. But at the end of the day, ASP Isotopes is sitting with cash and Renergen is in need of funding. The team at ASP also has experience in getting difficult assets to work in South Africa, with the Renergen team having missed enough milestones that it’s been very hard to win the trust of the market. Once you layer on the interesting supply/demand dynamics for helium and isotopes, there’s a loose argument to be made that the assets might belong in the same group. But above all, I think this is just opportunistic dealmaking – and why not?

This is structured as a share-for-share offer, with ASP Isotopes currently listed on the NASDAQ and due to list on the JSE. The relative prices based on 16 May put the offer at a premium of 41.3% to the Renergen 30-day VWAP. The independent board of Renergen has been advised by Forvis Mazars as the independent valuation expert. Based on that report, the board sees the offer as unfair but reasonable to shareholders, which means that it is below the estimated fair value, but above the current traded price. I refer you to my opportunistic dealmaking comment. I must also note that the standby offer isn’t even conditional on a minimum acceptance threshold, so ASP Isotopes is happy to pick up any number of Renergen shares at this price.

Irrevocable undertakings have been provided by holders of 35.86% of shares in Renergen, including executive management. Mazi Asset Management led the way here, with a 13.5% stake in Renergen that I’m sure caused them many sleepless nights.

There are a number of conditions precedent for the deal, including AIRSOL agreeing to extend the maturity date for the convertible debentures to at least 31 March 2026. They also need banking and regulatory approvals, along with the approval for ASP Isotopes to list on the JSE.

The general meeting to vote on the scheme has been scheduled for 10 July.

Southern Palladium locks in A$8 million in fresh equity (JSE: SDL)

And at a solid price, too

Junior mining is all about making sure that the market is willing to support you with capital raises. It requires immense capex to get a mine off the ground (or into it, as the case may be!), funded via a spectrum of options from pure equity through to innovative debt and debt-like structures. Royalty agreements and prepaid offtakes also pop up from time to time.

At Southern Palladium, the latest raise of A$8 million is as simple as it gets. They’ve received commitments from one of the largest current shareholders to the tune of A$4.6 million, with this cornerstone investment helping to get a number of new and smaller institutional investors across the line. Institutions tend to move in packs on something like this, relying on the power of a joint due diligence.

Here’s the really good news: the placement is priced at A$0.50 per share, which means a 10.5% premium to the 10-day VWAP. That’s really impressive, as investors usually want to receive shares at a discount before supporting a raise like this.

The proceeds will be used for the Definitive Feasibility Study (DFS) work at Bengwenyama, along with other key milestone like the publication of the optimised Pre-Feasibility Study (PFS) and receipt of a Mining Right.

In junior mining, it’s all about hitting those milestones and having access to funding along the way.

Nibbles:

  • Director dealings:
    • Various directors of Hammerson (JSE: HMN) bought shares via a dividend reinvestment plan. The aggregate value of purchases is R800k.
    • The CFO of Spear REIT (JSE: SEA) bought shares worth R209k.
  • Recently listed Shuka Minerals (JSE: SKA) has received final authorisation from the Competition and Consumer Protection Commission for the proposed acquisition of 100% of Leopard Exploration and Mining in Zambia. The underlying asset is the Kabwe Mine. To pay for the deal, they will issue $3 million worth of new shares (at a premium to the current market price) and will fund the remaining $1.35 million in cash through a new unsecured and non-dilutive facility. Once issued, the shares will represent 29.99% of total shares in issue. The sellers of Leopard will also receive 2,000,000 share warrants. Importantly, there’s no deferred compensation here, so there is clarity up-front regarding the total acquisition price.
  • MTN Zakhele Futhi (JSE: MTNZF) closed 42% higher on Thursday based on the news that the board is unwinding the structure. This just shows you how big the liquidity discount is in these B-BBEE entities. The board will soon update investors on exactly how the cash proceeds from the sale of MTN shares will be used to settle debt before being distributed as part of the unwinding of the structure.
  • Here’s an unusual and interesting director appointment for you: Clientèle (JSE: CLI) has appointed Ian Kirk as what they refer to as a non-independent director. That feels like a typo and that it should be non-executive director. Kirk is of course the ex-CEO of Sanlam and Santam. He serves on several other boards at the moment.
  • We may be spared from further Italtile (JSE: ITE) director dealings announcements this month, as the non-executive director who is selling pledged shares has resigned from the board with immediate effect.

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

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

Exchange-Listed Companies

Sana Bidco, the consortium formed by US private equity firm Kohlberg Kravis Roberts and infrastructure investor Stonepeak, raised its offer to acquire UK healthcare real estate investor Assura in a bidding war with rival suitor Primary Health Properties (PHP). KKR raised the offer price to 52,1 pence per share, valuing the company at £1,7billion (R41 billion). The best and final offer includes declared dividends of 1,68 pence and represents a 39.2% premium over the pre-offer closing price of 13 February 2025. The Assura Board has recommended that shareholders accept the Sana Bidco offer. PHP is considering its options and will make a further announcement in due course but strongly advises Assura shareholders not to act in response to Sana Bidco’s increased offer.

PK Investments has further increased its offer to MAS minorities. The May offer, initially priced at €0.85 per share, was increased to €1.10 and now sits at €1.40 per share. During this period Hyprop undertook a private placement, raising R808,3 million which the company said would be used, in part, to propose a deal that would offer MAS shareholders the option of a share swap or a cash alternative.

Final authorisation has been received by Shuka Minerals from the Competition and Consumer Protection Commission for the proposed acquisition of 100% interest in Zambian mining and exploration company Leopard Exploration and Mining which owns the Kabwe Zinc Mine in Zambia. The transaction value of $3 million will be settled by the issue of 28,640,042 new ordinary shares at £0.07737 per share and a cash component of $1,35 million. The shares will represent on issue, 29.99% of the company’s enlarged issue share capital.

The circular detailing ASP isotopes’ offer to Renergen shareholders has been released – shareholders will vote on the scheme at the General Meeting to be held on 10 July 2025.

Unlisted Companies

Local agri-tech startup Nile has secured US$11,3 million in funding in an investment round led by the Cathay AfricInvest Innovation Fund alongside the Dutch entrepreneurial bank FMO and existing investors. The funds will be used to expand its agricultural inputs marketplace in Southern Africa and introduce innovative financing solutions in partnership with banks.

MyNextCar (MNC), the South African vehicle solutions company, has raised $10 million in its first funding round with support from Emso Asset Management, Bolt (MNC is a key partner in Bolt’s fleet network), Assemble Capital and E2 Investments. The capital will enable MNC to deploy c.1,500 company vehicles, earmarked specifically for Bolt Lite.

SA-H2 Fund, also known as CI3 South Africa, has made an inaugural investment in Hive Hydrogen, South Africa’s first large-scale green ammonia plant based in the Eastern Cape. Hive Hydrogen South Africa is a joint venture between UK-based Hive Energy and SA renewable energy investment company BuiltAfrica. SA-H2 Fund, which is a partnership between climate finance investor Climate Fund Managers and Dutch development financing institution Invest International, has committed up to US$20 million in development funding to complete the final stage of development of the ammonia project. SA-H2 has the option to participate in the construction phase for up to $200 million.

The Public Investment Corporation (PIC), the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa (DBSA) have pledged a total of US$37 million to SA-H2 Fund to finance green hydrogen projects. The PIC will has pledged $17 million while the IDC and DBSA will each invest $10 million over several tranches.

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

Weekly corporate finance activity by SA exchange-listed companies

Marylou Greig
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Weekly corporate finance activity by SA exchange-listed companies

With reference to the mandatory offer by Novus to Mustek shareholders in November 2024, Novus has acquired on the open market, 2,031,438 Mustek shares (a 3.53% stake) at R13.00 per share in a transaction valued at R26,41 million. The shares increase the company’s interest in Mustek to 38.6% which together with concert parties constitutes c.58.89% of the issued share capital in Mustek.

Final authorisation has been received by Shuka Minerals from the Competition and Consumer Protection Commission for the proposed acquisition of 100% interest in Zambian mining and exploration company Leopard Exploration and Mining, which owns the Kabwe Zinc Mine in Zambia. Shuka Minerals will issue 28,640,042 new ordinary shares at £0.07737 per share. The shares will represent on issue, 29.99% of the company’s enlarged issue share capital.

MTN Zakhele Futhi (RF) – MTN’s B-BBEE vehicle has completed an accelerated bookbuild placing 23,768,040 MTN shares (1.26% stake) at R128.00 a share in a private placement for gross proceeds of R3 billion. MTNZF intends to use the net proceeds of the placement to settle its outstanding preference share funding and related costs and to distribute the balance of proceeds to its shareholders.

In an equity placement, Spear REIT has raised R749 million which will be utilised in the short term to settle debt and to fund further solar projects. The group will issue 74,900,000 shares at R10 per share reflecting a premium of 1.06% to 30-day VWAP. Following the placement, the loan to value ratio of Spear will be within a range of 18%-20%.

Lighthouse Properties has raised R400 million in an equity raise, issuing 48,780,487 shares at R8.20 per share. The accelerated bookbuild was initially set at R100 million. Lighthouse signed an exclusivity agreement in February this year for the acquisition of a further mall in Spain which is expected to close during June, and which will increase the company’s exposure to Iberia to c.86%. Funds raised will be allocated to this and value accretive investments as they arise.

Oasis Crescent Property Fund will issue 350,785 new units to shareholders receiving the scrip dividend option in lieu of a final cash dividend, resulting in a capitalisation of the distributable retained profits in the company of R10,56 million.

Southern Palladium has undertaken a capital raising by way of a share placement. The company placed 16 million new fully paid ordinary shares at A$0.50 per share to raise A$8 million before costs. The shares were issued at a 10.5% premium to the 10-day VWAP of A$0.45 per share. The funds provide balance sheet strength to advance the next phase of Definitive Feasibility Study work and staged mine development at Bengwenyama.

Karooooo CEO Zak Calisto launched an underwritten secondary public offering of 1,500,000 Karooooo shares at US$50.00 per share for total gross proceeds of c.$75 million. The offering will close on 13 June 2025. The underwriters have a 30-day option to purchase up to an additional 225,000 shares at the public offering price.

Sappi has upgraded its presence in North America with its listing on the OTCQX with effect from 11 June 2025. Sappi’s current shareholder split is c. 70% South African and 30% non-South Africa.

This week the following companies announced the repurchase of shares:

Pan African Resources is to undertake a share buyback programme to purchase up to R200 million (c. approximately US11,1 million) ordinary shares in the market. The repurchase will commence on 17 June 2025.

In its annual financial statements released in August 2024, South32 announced that it would increase its capital management programme by US$200 million, to be returned via an on-market share buy-back. This week 756,925 shares were repurchased at an aggregate cost of A$2,31 million.

In October 2024, Anheuser-Busch InBev announced a US$2 billion share buy-back programme to be executed within the next 12 months which will result in the repurchase of c.31,7 million shares. The shares acquired will be kept as treasury shares to fulfil future share delivery commitments under the group’s stock ownership plans. During the period 2 to 6 June 2025, the group repurchased 350,000 shares for €21,75 million.

On 19 February 2025, Glencore plc announced the commencement of a new US$1 billion share buyback programme, with the intended completion by the time of the Group’s interim results announcement in August 2025. This week the company repurchased 16,250,000 shares at an average price per share of £2.91 for an aggregate £47,33 million.

Hammerson plc continued with its programme to purchase its ordinary shares up to a maximum consideration of £140 million. The sole purpose of the buyback programme is to reduce the company’s share capital. This week the company repurchased 253,632 shares at an average price per share of 292 pence for an aggregate £739,934.

In line with its share buyback programme announced in March 2024, British American Tobacco plc this week repurchased a further 580,051 shares at an average price of £35.02 per share for an aggregate £20,31 million.

During the period 2 to 6 June 2025, Prosus repurchased a further 4,427,203 Prosus shares for an aggregate €204,27 million and Naspers, a further 251,381 Naspers shares for a total consideration of R1,33 billion.

Two companies issued profit warnings this week: Aveng and KAP.

During the week three companies issued or withdrew cautionary notices: TeleMasters, Trustco and Renergen.

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

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

Vanessa Aitken
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Who’s doing what in the African M&A and debt financing space?

DealMakers AFRICA

First Ally Capital has acquired a 60% stake in Mines.io Nigeria, operating under the brand name Migo. The Nigerian fintech focuses on delivering digital credit solutions using AI and machine learning. Financial terms of the deal were not disclosed.

ASX-listed Dalaroo Metals has signed a joint venture agreement with Reflex Exploration to acquire up to an 80% stake in the Bongouanou Gold Project in the Sefwi-Comé Birimian Greenstone Belts in Côte d’Ivoire.

Canadian solar energy company, Solar Panda, has acquired VITALITE Zambia for an undisclosed sum. The acquisition expands Solar Panda’s operational footprint into Southern Africa. VITALITE was the first company to introduce PAYGO solar home systems in Zambia.

uMunthu Investment Company II (managed by Goodwell Investments) has acquired a 26% stake in Nigeria’s Hinckley Ewaste Recycling. No financial terms were disclosed.

Wafa Assurance has submitted and mandatory tender offer to acquire up to 100% of Delta Insurance at EGP40 per share. The transaction is valued at a total of EGP5 billion and requires a minimum acceptance of 51%. Wafa and Axa Egypt made a non-binding offer to acquire Delta in December 2024, but Axa pulled out of the offer in May, which triggered a six-month mandatory cooling-off period. Should the transaction be successful, Wafa plans to delist Delta from the EGX.

Africa-focused private investment firm, Silverbacks holdings, has partially exited its stake in OmniRetail and secured a 5x return on its initial investment. The exit follows OmniRetail’s recent US$20 million Series A funding round led by Norfund and Timon Capital.

The International Finance Corporation is currently considering a US$10 million equity investment in Senegal’s AI healthcare startup, Kera Health Platforms. The investment is currently pending approval.

Kendrick Resources has entered into a 60-day option and joint venture agreement with Cooperlemon Consultancy for the exploration and, if appropriate, the development of the Blue Fox Licence, 34412-HQ-LEL located in Northwest Zambia.

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

The strategic response to a takeover attempt

Isaac Fenyane and Nina Gamsu
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The strategic response to a takeover attempt

At times, the move of a potential takeover bid comes about when least expected, and requires management and directors of companies to make quick and informed decisions. For South African companies, where the legal framework is shaped by the Companies Act 71 of 2008 (the Companies Act) and accompanying Takeover Regulations, responding strategically to a takeover attempt requires both legal acumen and commercial foresight. This article explores, at high-level, how companies can navigate such turbulent waters, balancing their statutory obligations with strategic imperatives while remaining neutral and objective.

Understanding the legal framework

The Companies Act and the common law provide the overarching foundation for corporate governance in South Africa. The law imposes fiduciary duties on directors, most notably under section 76, which requires directors to act in the best interests of the company and its shareholders. These duties become more critical in a takeover bid, where there is increased potential for conflicts of interest and divergent views and interests among a company’s stakeholders.

In addition, the Takeover Regulations play a pivotal role. They ensure transparency and fairness during takeover bids by mandating, amongst other things, disclosures of material information and restricting defensive measures that could frustrate the bid or otherwise deprive shareholders of an opportunity to fairly evaluate the bid and decide on its merits.

Together, the Companies Act and the Takeover Regulations ensure that a company’s response to a takeover is both legally compliant and geared towards protecting the collective interests of its shareholders.

Strategic defensive measures

When a takeover attempt is launched, the board of the target company must carefully assess the offer. The primary obligation is to evaluate the bid’s merits objectively, considering both immediate financial implications and long-term strategic impacts. At the heart of this evaluation lies the board’s duty to act impartially and in the best interest of all shareholders.

Part of the strategic response is to seek an independent expert opinion. This not only reinforces the board’s objectivity, but also provides shareholders with a robust analysis of the offer’s fairness. The expert’s assessment can cover valuations, the strategic rationale behind the bid, and the potential impact on the company’s prospects. By grounding their response in independent analysis, the board can help ensure that its recommendations are both credible and legally sound.

Another important strategic measure is the careful management of information disclosure. Under the Takeover Regulations, the target company is required to communicate material developments promptly and accurately to its shareholders. This includes circulating a response that outlines the board’s position on the bid, any concerns regarding potential conflicts of interest, and recommendations for shareholders. Transparency is crucial in preventing misinformation and ensuring that all stakeholders are equipped to make informed decisions.

Neutrality and fiduciary duties

Central to the strategic response is the board’s commitment to observe neutrality. The Companies Act, particularly section 76, emphasises that directors must not favour one outcome over another if doing so would compromise their duty to the company as a whole. In practical terms, this means that defensive measures should not be implemented solely to frustrate the bid, unless such measures have been explicitly approved by shareholders in a general meeting.

This principle of neutrality is reflected in the prohibition on defensive actions without shareholder consent. The Takeover Regulations restrict the board from taking measures such as issuing new shares or disposing of key assets during the offer period unless the shareholders have sanctioned these actions. This safeguard is designed to prevent management from unilaterally altering the company’s structure to deter the takeover attempt.

The Takeover Regulations ensure that directors are able to adequately comply with their fiduciary duties. They require that an Independent Board be set up to manage all aspects of the potential takeover, including negotiating the offer and evaluating its reasonableness; this is especially relevant when the directors are potentially conflicted. The primary purpose of the Independent Board is to ensure that the bid offer is fairly evaluated by independent directors whose assessment would not be swayed by personal interests or biases.

Case in point: BHP and Anglo American

As a case in point, the strategic manoeuvrings observed in the BHP/Anglo American deal are worth pointing out. In that instance, Anglo American embarked on a series of defensive strategies in response to an unsolicited bid from BHP. Although the specifics of the BHP/Anglo transaction remain a matter of public debate, the case illustrates several key points that are applicable to any takeover scenario.

The BHP/Anglo American case underscores the importance of a well-structured and transparent response. The board’s decision to engage with independent advisors, coupled with a clear communication strategy to shareholders, was critical in ensuring that the company’s actions were seen as fair and balanced. Moreover, by avoiding overtly aggressive defensive measures, Anglo American was able to preserve the integrity of its governance framework and maintain confidence among its stakeholders.

Balancing commercial and legal considerations

In formulating a strategic response to a takeover, companies must strike a delicate balance between commercial imperatives and legal obligations. On one hand, there is the need to safeguard shareholder value and ensure that any countermeasures do not inadvertently diminish the company’s market position or prospects. On the other hand, adherence to legal standards and regulatory guidelines is non-negotiable.

A comprehensive approach involves a thorough due diligence process that evaluates the bid from multiple perspectives. This includes assessing the financial valuation, understanding the bidder’s strategic objectives, and considering the potential impact on existing operations and long-term growth. Equally important is the need for proactive engagement with legal and financial advisors whose expertise can help navigate the complexities of both the Companies Act and the Takeover Regulations.

Practical guidance

For companies facing a takeover situation, several practical steps are recommended:

  1. Engage independent advisors early: obtain unbiased valuations and strategic assessments to support the board’s decision-making process.
  2. Ensure transparent communication: draft response circulars and disclosures that comply with regulatory requirements and clearly articulate the board’s rationale.
  3. Maintain board neutrality: avoid unilateral defensive measures that could be perceived as protecting management interests at the expense of shareholders.
  4. Conduct comprehensive due diligence: evaluate both the financial and strategic merits of the bid, considering the current market environment and the company’s long-term goals.
  5. Prepare for shareholder engagement: be ready to present a balanced view at shareholder meetings, explaining both the potential benefits and risks associated with the bid.

Conclusion

The strategic response to a takeover attempt is a complex and nuanced process that requires careful navigation of South African company law. By grounding their actions in the legal framework provided by the Companies Act and the Takeover Regulations, companies can ensure that their defensive strategies are both compliant and strategically sound.

The key lies in balancing legal obligations with commercial realities, ensuring that every step taken in response to a takeover bid is both measured and forward-looking. In an environment where market conditions and regulatory landscapes continue to evolve, the ability to craft a strategic, legally robust response remains a critical asset for any company facing a takeover attempt.

Isaac Fenyane is an Executive and Nina Gamsu a Candidate Legal Practitioner in Corporate and Commercial | ENS

Musings of a reconditioned private equity partner

Peter Mason
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Musings of a reconditioned private equity partner

Good corporate governance makes sound commercial sense (Part 1)

‘Good corporate governance helps companies operate more efficiently, improve access to capital, mitigate risk, and safeguard against mismanagement.’ (International Finance Corporation)1

Much literature suggests that there is a clear correlation between equity value, the ability to raise debt – as well as the price at which debt is provided – and good corporate governance. Many private companies, though intuitively recognising this as common sense, often fail (at their cost) to address it properly.

I recently returned to legal practice after a decade working as a partner of a private equity fund manager. I reflected that there are some lessons that I learned at the coal face about investing in businesses and managing debt which could bear repeating. A previous partner of mine frequently observed that “common sense isn’t very common”. I hope, if this all appears to be blindingly obvious, that you will forgive this common sense approach. My intention in this case is merely to remind you of something you probably already know – ensuring the implementation of good corporate governance is commercially sensible. During my business career, I haven’t encountered anyone who didn’t agree, at least in principle, with this proposition.

When evaluating a prospective investment, a serious private equity investor will, always conduct a comprehensive review of its corporate governance. This enquiry is not restricted to financial investors, however, and the same considerations would apply in relation to raising debt and, for that matter, to any corporate action involving an acquisition, merger, subscription, or any other similar process.

Most executives I have met, and most boards I have either sat on or worked with, invariably believed that even if a bit of improvement may be necessary every now and then, the principles of good corporate governance are generally applied by them or, at the very least, the governance measures at their company are sufficient for its specific requirements. I am unconvinced.

I have looked at many privately owned businesses, and it is unusual to encounter one that has, neatly filed away, a complete set of resolutions or full set of minutes – at both board and shareholder level. This is understandable, as establishing and maintaining these records is an inconvenience which requires attention and is often a detailed and boring process. What executive teams often fail to appreciate is the cost of this failure.

An email exchange between management and the board is seldom formally documented. Likewise, if the executive team are also board members, formal board meetings are seldom held. Most executive teams regard themselves as serious, professional people who communicate decisions, and whose behaviours are both considered and deliberate. More often than is comfortable, however, the formal record of a company’s decisions and actions is found in emails, electronic messages, and the recollections of various individuals. The absence of a formal record makes the entire decision-making process opaque.

In more highly regulated environments, governance implementation is less of an issue, though recent press coverage of some failures may make a lie of that statement. In the private company space, however, where resources are scarcer and time is limited, it is frequently easy to let things slide.

The King IV Report on Corporate Governance for South Africa 2016, which will shortly be supplemented by King V, is the authority on the subject in this country, but a quick internet search will reveal a plethora of both South African and international resources and papers on every aspect of the subject of corporate governance. Don’t let this fool you, however; the availability of resources merely means that they exist, but not necessarily that they have been considered.

There is much literature about the link between successful businesses and good corporate governance. While this link may seem self-evident, in my experience from private equity, it does not always seem to be appreciated.

The simplest reason for getting governance right is to allow some light to be shone into the world of corporate decision-making, so that decisions taken may be seen to be both rational and lawful. If the information available is transparent, comprehensive and complete, then anyone who views it is equipped to make the best possible decisions for the company in the shortest possible time.

At the acquisition stage, if the information provided to a prospective investor is clear and easily available, they can quickly evaluate the risk environment within which the business operates and make sensible and informed decisions. The investor can develop a clear and detailed view of the company’s history, the challenges it has faced and how it overcame them, and the threats and opportunities in the environment in which it presently operates.

Banks and other third-party credit providers also really like to see that this information is available. Again, for all the same reasons, information that is clear and available enables them to make credit and related risk decisions much more effectively.

Private companies looking for investors or finance would be well advised to ensure that their governance practices are set up to facilitate these kinds of reviews. A business which has effective governance structures and processes in place looks like it is being well run.

1.https://www.ifc.org/en/what-we-do/sector-expertise/corporate-governance

Peter Mason* is a Senior Consultant | Bowmans

*Peter is an ex corporate finance and banking lawyer. After leaving banking, and a brief sojourn at a large SA law firm, he spent 10 years as a partner of a private equity fund manager based in Johannesburg.

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

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

Africa’s fintech sector: a story of growth, innovation and opportunity

Liesl Olivier
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Africa’s fintech sector: a story of growth, innovation and opportunity

Africa’s fintech evolution is a fascinating example of how a confluence of technological and customer behaviour trends can create not one, but several leapfrog moments.

The genesis of fintech’s success across the continent, especially payment providers such as Paystack, M-Pesa, Moniepoint, Mukuru, Momo Money and Flutterwave, is primarily due to the advances made in the telecommunications industry. As telecommunications providers built network infrastructure to support mobile phone access from Cairo to Cape Town, they unwittingly created the backbone that enabled feature phones and then smartphones to thrive across Africa.

It is the access created by these mobile technologies that has allowed consumers on the continent to connect to the global digital payments system, with PCs and laptops no longer a necessity. Before digital payments came into being, African consumers quickly adapted to new payment plans to go mobile, such as pay-as-you-go, which became available in South Africa in 1996.

In 2022, global consultancy McKinsey published a report called Fintech in Africa: The end of the beginning, where it stated:

“Our analysis shows that fintech players are delivering significant value to their customers. Their transactional solutions can be up to 80 percent cheaper and interest on savings up to three times higher than those provided by traditional players, while the cost of remittances may be up to six times cheaper.”

“Taken together with an influx of funding and increasingly supportive regulatory frameworks, these factors could signify that African fintech markets are at the beginning of a period of exponential growth if, as expected, they follow the trajectory of more mature markets such as Vietnam, Indonesia, and India.”

TELECOMS ARE BECOMING FINANCIAL SERVICE COMPANIES

Of further interest is the way in which, over the last decade, telecommunications companies have become financial service companies. Safaricom (owner of M-Pesa), MTN and Vodacom are examples of telecommunications companies that have leveraged their owned infrastructure to challenge, and often surpass, traditional banks to capture market share in the financial services sector, optimising opportunities for cross-selling.

Broadly speaking, African telecommunications providers have shown an appetite for calculated risk that their peers in Europe and North America would baulk at. Often, African providers are not just building telecommunications infrastructure at the greenfield stage, but other infrastructure taken for granted in older markets, such as roads, electricity and security, a role traditionally played by mining companies.

REGULATORY ENVIRONMENT AMONG KEY FINTECH CHALLENGES ACROSS AFRICA’S MARKETS

The fintech sector’s success across Africa’s markets does, however, run into its own challenges. According to McKinsey, the key challenges cited as stymying the continent’s fintech sector were scale and profitability, an uncertain regulatory environment, scarcity, and corporate governance.

Speaking to our clients operating across the continent, the regulatory challenge alone is one that poses significant delays and uncertainty for businesses.

Central banks and bodies that regulate the fintech sector play an outsized role in shaping national sector development. In fact, recent regulatory changes made by the Central Bank of Nigeria reportedly helped their fintech sector grow by approximately 70% in 2024.

Key to regulatory success is forming or leveraging existing relationships with regulators based on trust and mutual respect, which takes years to cultivate. Webber Wentzel partners with our clients to maintain and manage these relationships, working with specialist local firms and on-the-ground teams versed in the complexities of financial services and digital regulation.

On occasion, working with regulators also requires leveraging our legal expertise beyond the financial services sector, which is why it’s advantageous to partner with a full-service firm. While legal text can be interpreted in a limited number of ways, having the right personnel and expertise in the room is as much a success factor as legal knowledge, as noted by select clients.

INSURANCE – THE NEXT EXCITING MARKET

When speaking of fintech in Africa’s different markets, what is materially being referred to is Africa’s digital payments landscape. It has been the sector’s growth engine, with Africa accounting for around 70% of global mobile money payments in 2022.

But with payments reaching maturation, what’s the next frontier? According to some of our clients in the financial services sector, insurance is the next great fintech opportunity across the continent.

In 2022, the insurance penetration rate in East Africa’s various economies was dismally low: 2.14% in Kenya, and 0.62%, 0.74%, and 0.3% in Tanzania, Uganda, and Ethiopia respectively. The penetration rate of life insurance continent-wide was reportedly 1.6% in 2022, with South Africa accounting for 79% of total life insurance premiums in Africa.

Like the payments landscape, success will depend on having a nuanced understanding of local market conditions and consumer behaviour, in addition to conforming to the legal framework. For example, in Nigeria, a startup called WellaHealth has partnered with pharmacies to provide insurance products to pharmacy customers, knowing that most Nigerians will visit a pharmacy first, and self-treat before seeing a doctor.

As digital penetration continues to make inroads outside Africa’s largest markets, Africa’s fintech leaders will likely be joined by innovative newcomers in the next few years.

Liesl Olivier is a Senior Associate | Webber Wentzel

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 (Assura – Primary Health Properties | MultiChoice | Naspers – Prosus | Pan African Resources)

The Finance Ghost
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Ghost Bites (Assura – Primary Health Properties | MultiChoice | Naspers – Prosus | Pan African Resources)

The bidding war worked out nicely for Assura shareholders (JSE: AHR)

The private equity bidders have upped their offer to compete with Primary Health Properties (JSE: PHP)

Assura is hot property. KKR and Stonepeak have been trying to seduce shareholders with a cash-based offer (as is always the case for private equity bidders), while fellow listed company Primary Health Properties has been using its listed status to try and persuade shareholders into a merger. Of course, the real winners in the situation of competitive tension are the shareholders of the target company.

After Primary Health’s initial offer was deemed to be inadequate to even be worth a look, it appeared as though KKR and Stonepeak were on their way to a successful deal. Primary Health then swooped back in with an upgraded offer that was interesting enough to force the Assura board to pay attention, calling a halt to the meeting to vote on the KKR and Stonepeak deal while they conducted due diligence on Primary Health.

KKR and Stonepeak have further sharpened their pencils, returning with what they have called a “best and final” offer that works out to 52.1 pence per Assura share.

The Assura directors must be getting whiplash at this point, as they’ve now swung their attention back to KKR and Stonepeak and called this a fair and reasonable offer that they intend to unanimously recommend to shareholders.

They’ve also commented that after doing due diligence on the Primary Health offer, they’ve decided that it “presents material risks” to Assura shareholders – of course it does, as it’s a merger rather than a cash deal. Assura couldn’t help but get in a dig at Primary Health’s portfolio, which they note as having higher exposure to public sector rather than private sector assets.

Primary Health released an announcement later in the day that “strongly disagrees” with the Assura assessment. They also indicated that government spending on healthcare is expected to be positive for the portfolio in years to come.

Cash is king. If someone puts a proper cash number on the table, that’s the deal that happens. This is how life works.

MultiChoice always seems to be in even more trouble than I thought (JSE: MCG)

They are losing linear subscribers locally and in Rest of Africa

Aah, MultiChoice – a company that boasts about 5.7% price increases in South Africa as “inflationary” and “disciplined” thanks to their strong cost control. This of course is while bleeding subscribers left and right, with 600k linear subscribers in South Africa having run for the hills. In Rest of Africa, the pricing increase was an average of 31% in local currency. While inflation in Africa is certainly much higher than what we are used to seeing in South Africa, the loss of around 600k linear subscribers elsewhere in the continent is an indication that perhaps their pricing strategy needs work. The total loss of 1.2 million subscribers is an 8% drop in the active subscriber base.

I don’t know what the incremental cost of adding a subscriber is, but it’s very hard to imagine that it wouldn’t be accretive to MultiChoice to be more affordable and attract more subscribers. The current strategy certainly isn’t working, with organic revenue growth of just 1% in the year ended March 2025.

They are still investing like crazy in Showmax, which of course they justify based on the loss of linear subscribers. This puts them squarely up against the likes of Netflix. Showmax subscribers increased 44% off a modest base, showing that there is some hope for that business. Still, group organic trading profit took a 9% knock thanks to the modest revenue growth being insufficient to offset the pressure of the investment in Showmax.

Once we move past “organic” numbers, we find a decline in revenue of 9% and a massive drop in trading profit of 49%. There was a free cash outflow of R0.5 billion in FY25 vs. an inflow of R0.6 billion.

The headline loss per share of 258 cents may be an improvement on the loss of 715 cents per share in the comparable year, but it’s still a substantial loss.

I can understand why MultiChoice needs to build a streaming offering. I just don’t agree with their approach to their linear business. In FY25, the South Africa linear business generated revenue of R33 billion and trading profit of R9.4 billion. By comparison, Showmax revenue was just R753 million and the trading loss was R4.9 billion – and that’s for the entire continent.

Again, this will hopefully become Canal+’s problem to manage. If it wasn’t for that transaction, it feels like MultiChoice would literally be running itself into the ground.

Naspers and Prosus earnings are through the roof (JSE: NPN | JSE: PRX)

I’m a very happy shareholder in the Bloisi era

I cannot overstate the importance of the management team in the companies that you invest in. In the previous era of Naspers and Prosus, I didn’t touch the shares as I had zero faith in the capital allocation strategy. In the Fabricio Bloisi era, it became obvious to me rather quickly that things were now different. I wrote about it at the time and indicated my decision to buy shares in the group (I chose Prosus). I’m so glad I did.

A trading statement for the year ended March 2025 reveals that core HEPS (which excludes gains on the sell down of Tencent) increased by 53.9% to 63.2% for Prosus, and 55.9% to 62.9% for Naspers. This is based on continuing operations, so it’s the best way to view the group. Including discontinued operations actually leads to slightly higher percentage growth rates.

Detailed financials are due for release on 23 June 2025.

Pan African Resources delivered in the second half (JSE: PAN)

The market gave me a gift in February and I took it with both hands

Back in February this year, Pan African Resources released an unfortunate set of interim numbers. The market hated them, mainly because Pan African went backwards at a time when the other gold miners were printing cash. The market dumped the shares, even though the company indicated that the second half should be much better for production and that a hedge on the gold price was due to expire at the end of February, giving them exposure to how strong the gold price had become.

That was good enough for me to say thank you to the market and buy the shares. Today, that position is 32% up. Not bad!

The second half has come through largely as promised, with record production at the company for a six-month period. Although they have fallen short of full-year guidance, coming in at 197,000oz vs. guided 205,000oz – 215,000oz, time has shown that the market overreacted.

Net debt is down 32% vs. the interim period and they expect to be debt-free during FY26 at current gold prices. This is helped by a production expectation for FY26 of between 275,000oz and 292,000oz, a jump of around 40% year-on-year thanks to things like the ramp-up at Evander being behind them now.

With the group approving a share buyback of up to R200 million, they are clearly feeling confident. With global geopolitics in such an inflationary position at the moment, I don’t blame them. I’ll be hanging onto my shares.

Nibbles:

  • Director dealings:
    • The director of Italtile (JSE: ITE) who needs to sell pledged shares this month has managed to offload another R31.3 million of them.
    • Associates of two directors of Ascendis (JSE: ASC) – including the CEO – bought shares worth R54k in aggregate.
    • Here’s another large forced sale of shares by a Discovery (JSE: DSY) director in relation to the maturity of a collar transaction. In this case, it’s Barry Swartzberg. He sold shares worth R74 million.
    • The CEO of RH Bophelo (JSE: RHB) bought shares worth R25k.
  • Here’s a surprise: the board of MTN Zakhele Futhi (JSE: MTNZF) has decided to fully unwind the scheme. This comes after a rally of 42% in the MTN share price this year. They announced the placement on Wednesday and a further announcement early on Thursday morning confirmed that they raised R3.0 billion in the process. They will now need to run through the settlement of the debt and the costs of unwind, with an announcement to come regarding the amount payable to investors.
  • African Rainbow Minerals (JSE: ARI) has hedged a significant portion of its stake in Harmony Gold (JSE: HAR). This takes the form of a collar hedge over 24% of the stake held in Harmony, or 2.84% of Harmony’s total shares. They’ve bought 18 million put options at a strike price of R234.85 and sold 18 million call options at a strike price of R562.40. Both options are exercisable in June 2030 (on average). Harmony’s current price is around R253, so they are mainly hedging against downside exposure here. They also talk about how this gives them access to funding in the future on efficient terms, so presumably they are thinking of using the hedged portion as collateral at some point.
  • With the mandatory offer circular out in the wild, Novus (JSE: NVS) is also able to acquire Mustek (JSE: MST) in the open market i.e. outside of the mandatory offer. They’ve acquired R26.4 million shares in this way, increasing their stake in Mustek from 35.07% to 38.60%.
  • Sappi (JSE: SAP) is trying to increase its visibility to North American investors. With around 70% of the current shareholder base being South African, they are looking to attract more international investors over time. To help achieve this, they are joining the OTCQX trading platform. There’s some pretty decent liquidity on there actually, with a number of companies choosing this route rather than a full-blown listing on e.g. the NASDAQ.
  • Speaking of visibility to US-based investors, AngloGold Ashanti (JSE: ANG) has been added on a preliminary basis to the Russell indices. There are a few of these indices, with AngloGold still waiting to see whether they are in the Russell 1,000 or Russell 2,000 (in addition to the Russell 3,000 and Russell Midcap) indices. This matters because of the large number of index-tracking funds that are driven by these indices. Those funds will now need to buy and maintain a holding in AngloGold.

Ghost Bites (FirstRand | KAP | Kore Potash | Premier | Southern Palladium | Telkom)

The Finance Ghost
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Ghost Bites (FirstRand | KAP | Kore Potash | Premier | Southern Palladium | Telkom)

FirstRand has received approval for the HSBC South Africa deal (JSE: FSR)

They are essentially giving HSBC an orderly exit from South Africa

Back in September 2024, FirstRand announced that they would be acquiring the clients, assets and liabilities as well as employees of HSBC’s branch in South Africa.

The group has now received regulatory approval for the deal. This is a boost to FirstRand’s corporate and investment banking business (RMB), as the clients are typically multinational organisations operating in South Africa (hence why it was so important to HSBC to achieve a smooth transition for those clients).

The transaction will be complete by the end of October 2025.

Another klap for KAP (JSE: KAP)

The share price closed 22% lower after a trading statement

KAP released an update for the 11 months of the financial year up until May 2025, so that’s essentially a pre-close update. The interim period was unpleasant for KAP, with the group having reported a 21% drop in HEPS at that stage. Things have only gotten worse, with the expectation being a drop in HEPS of at least 30% for the full year.

This is despite PG Bison getting the new MDF line in Mkhonda up and running properly by the end of the year, achieving full utilisation in the fourth quarter vs. only 60% in the first half of the year during ramp-up. Despite this, operating profit fell due to depreciation and other costs on the new line, along with depressed export prices. It’s never a good look when your shiny new facility is a drag on profitability!

At least Safripol went in the right direction, with both revenue and operating profit higher. The same can be said for Sleep Group. Blink, and you’ll miss the highlights package in these numbers – I’m afraid it’s only those two divisions.

Over at Unitrans, revenue and operating profit fell despite the restructuring activities at the end of 2024. They are now restructuring the petrochemical operations as well.

Feltex had a better second half than first half, but still faces significant challenges as production comes under pressure at lower vehicle manufacturers. Revenue and profit were down for the full year.

Optix revenue and operating profit fell, with performance well below KAP’s expectations.

Speaking of being below expectations, their debt reduction efforts are running behind schedule because of pressure on EBITDA.

These really are poor numbers. The share price closed 22% lower and I’m not surprised. Things just never seem to get better at KAP, with there always being something that ruins the story. With an imminent change in CEO, the market will be looking for decisive action that fixes a situation where KAP is trading 33% below where it was 5 years ago – in the throes of COVID!

Kore Potash has announced details of a funding plan for the Kola Project (JSE: KP2)

Although they aren’t explicit for some reason, I think this is the Summit Consortium

Companies sometimes do strange things when it comes to the wording of their announcements. Since forever, we’ve been hearing about how the Summit Consortium is the likely source of funding for Kore Potash’s Kola Project, but they’ve also made it clear that other parties may emerge. We now have details of a funding package, but there’s no mention of the Summit Consortium anywhere in the announcement. I’ve gotta tell you that online searches aren’t conclusive, so I think this is the Summit Consortium package coming through (Occam’s Razor and all that), but I can’t say for sure.

These are still non-binding term sheets, so anything could happen. All we know for sure is that a package of $2.2 billion is on the table, structured as a combination of senior secured project finance and royalty financing. The counterparty is OWI-RAMS, a Swiss investment platform part of the portfolio of Record Financial Group, a UK-based multi-asset investment company. OWI-RAMS invests in the food security value chain. You can’t eat potash, but you certainly can (and should) use it as plant fertiliser.

Interestingly, the funding needs to be structured in accordance with Shari’ah principles. I did a great podcast with Yusuf Wadee of Satrix last year on this topic, in case you want to learn more about these principles.

This structuring requirement is why they talk about a profit payment rather than an interest cost, coming in at between 6.8% and 9.3% per annum (depending on the outcome of the due diligence). This is on the senior facility, which represents around 70% of the total funding requirement. No payments are due for the first 49 – 50 months during the construction and ramp-up phase, with the capital amount then amortised over the subsequent 7 – 8 years. As you would expect, there are a number of financial covenants attached to this, including limitations on dividends unless specific interest cover ratios are in place.

The remaining 30% of the funding is a royalty arrangement, giving the financier a share of the gross revenues generated by the Kola Project over the life of mine. This is like selling shares in the company, except the shareholder has no exposure to the costs of production and just skims an amount off the top. While the senior debt is outstanding, the revenue-sharing is equal to 14% of gross revenue. Thereafter, the percentage is 16%.

Cleverly, Kore Potash includes a table of what it would look like for shareholders if they raised the royalty financing amount ($655 million) on the market instead of through this deal. Estimated dilution would be somewhere between 60% and 80%, depending on the pricing achieved. They do however acknowledge that the royalty rate of 14% to 16% is significantly higher than the typical market percentages.

I can’t help but wonder if we might see other potential sources of funding emerge, including strategic investors who might want to inject capital in order to reduce the requirement for the costly royalty-financing agreement.

The share price closed 2.3% lower on very strong volumes on the day, so the market wasn’t exactly thrilled with these terms.

Premier is a great example of when leverage works in your favour (JSE: PMR)

Margin expansion does wonders for an income statement

Premier’s share price is up 114% over 12 months. That’s been great news not just for Premier shareholders, but for punters in Brait as well.

Supporting this share price increase is revenue growth of 7% for the year ended March 2025, which was enough to drive EBITDA higher by 14.7%. HEPS increased by 26.8% to 943 cents, which means that the current share price of R136 is a pretty fully Price/Earnings multiple of 14.4x. I would argue that the re-rating has largely played out, which means that share price growth from here onwards will primarily be driven by earnings growth.

Thankfully, both underlying divisions grew revenue, with Millbake up 5.7% and Groceries and International up 13.3%. Interestingly, the margin story is the other way around, with Millbake’s EBITDA up 14.7% and Groceries and International only up 9.2%. The latter was impacted by some operational disruptions and the unrest in Mozambique.

The economics of baking businesses like Millbake mean that relatively modest revenue growth can drive significant earnings growth due to the inherent operating leverage (fixed costs) in the business model. The other side of that coin is that weak revenue growth is leveraged up into an ugly outcome.

The expectation for FY26 is only moderate revenue growth, with the group expecting to pass cost savings on maize input prices through to consumers. There will be other sources of inflation though, like Eskom tariff hikes and other South African infrastructure issues. With no shortage of investment in improving its business over time, Premier looks pretty well positioned for those challenges.

Southern Palladium is raising capital this week (JSE: SDL)

The differences between the rules of the Australian Stock Exchange and the JSE are stark here

Southern Palladium is looking to raise capital this week. We don’t know how much yet, as they haven’t made a detailed announcement. The reason we know that this is happening is because a trading halt has been put on the shares on the Australian Stock Exchange, pending a detailed announcement. On the JSE, there is no such trading halt.

This is a key difference in approach between the rules of the Australian Stock Exchange and the JSE, leading to some really awkward situations for companies. I’m led to believe that this is why Renergen didn’t take the route of a cautionary announcement for the ASP Isotopes deal, for example.

For Southern Palladium, the halt will be in place until the earlier of a detailed announcement regarding the outcome of the capital raise (which seems to be structured as a placement to specific investors), or the commencement of trade on 12th June.

The Australian approach seems very clunky vs. the JSE approach of cautionary announcements.

A great day for Telkom – and a great year! (JSE: TKG)

The share price closed nearly 8% higher based on results and a special dividend

Telkom released results for the year ended March. Although group revenue was only 3.3% higher, this was enough for adjusted EBITDA to jump by 25.1%, which means adjusted EBITDA margin was 470 basis points higher at 26.9%.

Thanks to the extent of free cash flow generated by this performance, net debt to group adjusted EBITDA decreased from 1.8x to 0.6x. Interest-bearing debt is R2.6 billion lower. And just to add some sprinkles on top, an ordinary dividend of 163 cents per share has been declared, along with a special dividend of 98 cents per share related to the cash proceeds of the Swiftnet disposal.

This is why the Telkom share price is now up 82% over 12 months, boosted by a day in which it closed nearly 8% higher in celebration of these numbers. This is further proof that investing isn’t about picking the best companies in the world – it’s about choosing the stocks that offer the best risk/reward trade-offs at a particular valuation.

One of the key underlying growth drivers is Telkom Mobile, which increased revenue by 10.2% and saw EBITDA margin expand to 20%. The results presentation noted that Telkom has enjoyed ten consecutive quarters of market-leading service revenue growth in this business.

Openserve’s fibre revenue was up 5.9%, but this wasn’t enough to put Openserve in the green overall, with total revenue down 1.3%. With 82% of revenue now from fibre-related services rather than the legacy voice business (up from 69% two years ago), the EBITDA margin is up to 32.4%.

BCX still has some way to go, with fibre-related revenue up 12.7% and cloud up 5.8%, but IT hardware sales down 23.7%. The improving mix of services saw an uptick in EBITDA margin from 9.0% in the first half of the year to 13.2% in the second half.

Telkom expects annual revenue growth in the mid-single digits and ongoing improvement in EBITDA margins, although it does seem as though the positive step-change in the group is now behind them. Well done to those who believed in this story and bought into it!

Nibbles:

  • Director dealings:
    • As part of the substantial capital raise by Lighthouse Properties (JSE: LTE) that took place earlier this week, Des de Beer subscribed for shares worth R40.5 million.
    • Despite the fact that Gerrie Fourie is due to retire as CEO of Capitec (JSE: CPI) in July 2025, he’s bought shares worth R6 million.
    • A director of PSG Financial Services (JSE: KST) and two directors of different underlying subsidiaries bought shares worth R1.3 million.
    • An independent non-executive director of STADIO (JSE: SDO) bought shares worth R360k.
    • A director of a subsidiary of Tharisa (JSE: THA) sold shares worth R265k.
    • I’m just mentioning this trade for completeness, rather than because you can read anything into it. As we’ve seen recently, founding directors of Discovery (JSE: DSY) have been selling shares as pat of the unwinding of collar hedge positions, as the share price has closed above the call option price. These sales aren’t on a voluntary basis. The latest such example is Adrian Gore, who sold shares worth R38 million.
    • Here’s another trade that you can’t read much into – as previously warned, a non-executive director of Italtile (JSE: ITE) sold pledged shares worth R120k.
  • Metair (JSE: MTA) has appointed a new CFO, having previously announced the resignation of outgoing CFO Anesh Jogia with effect from 1 April 2025. As the group is going through so much change at the moment, the CFO role is truly critical. Alastair Walker has been appointed to the role with effect from 1 July 2025. Encouragingly, this is an internal appointment, as he currently runs the treasury at Metair. His previous corporate finance exposure will come in handy at Metair as they look to evolve the group.
  • I don’t often comment on institutional investor movements on share registers, but this one is interesting enough to warrant a mention. With Nutun (JSE: NTU) trying desperately to stabilise and grow the business, 36ONE has increased its stake from 4.47% to 6.48%. That’s bullish.
  • Putting another feather in the cap of NEPI Rockcastle (JSE: NRP), they have been included in the FTSE EPRA NAREIT Global Emerging Index, an absolute mouthful that essentially gives them an inclusion in any ETFs that track the index. It also improves visibility among global investors, which can lead to a broader shareholder register over time.
  • Trustco (JSE: TTO) has renewed the cautionary announcement related to the potential delisting from the JSE, Namibian Stock Exchange and OTCQX market in the US, with the plan being to subsequently list on the Nasdaq. They are still working on the steps required for this transaction.

Ghost Bites (4Sight | Alexander Forbes | Aveng | Barloworld | Lighthouse | Oceana | Omnia | PPC | Santova)

The Finance Ghost
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Ghost Bites (4Sight | Alexander Forbes | Aveng | Barloworld | Lighthouse | Oceana | Omnia | PPC | Santova)

4Sight carried on where the interim period left off (JSE: 4SI)

And yet the market is largely ignoring this small cap

4Sight’s website might be drowning in a soup of tech buzzwords, but the underlying corporate story is becoming increasingly interesting to follow. They are doing some smart stuff, like the cleverly structured B-BBEE deal that was announced in May this year. I appreciate it when small caps behave like larger companies, as it shows that the foundations are there for growth.

And growth is certainly the order of the day, with a trading statement for the year ended February 2025 suggesting an increase of between 27.9% and 38.6% in HEPS. I had a look at the interims to August 2024 and HEPS was up by 35.5%, so they’ve basically carried on where they left off at the halfway mark.

Despite this, the market isn’t paying much attention to the stock, with no obvious direction over the past year apart from the choppy bid-offer spread. To be fair, the suggested HEPS range of 6.932 cents to 7.510 cents vs. the current share price of 70 cents puts it on a pretty full P/E by small cap standards. Still, this is worth keeping an eye on.

A great year for Alexander Forbes (JSE: AFH)

This supports the share price growth over the past 12 months

The Alexander Forbes share price has been volatile, but heading higher in recent times. The 12-month performance is a gain of 38% and the release of results for the year ended March 2025 explains why that has happened.

Normalised HEPS has increased by 23%, boosted by operating income growth of 13% thanks to a combination of organic growth and the benefit of acquisitions made in previous years. Operating expenses were up 11% including the impact of major accounting changes, or 6% if you look through a more business-focused lens on the operations. Profit from operations increased by 14% and cash from operations grew by 15%, so mid-teens growth is probably the correct summary of this performance.

Although the dividend was only 10% higher at 55 cents per share for the full year, there’s a special dividend of 10 cents per share as well to sweeten the deal. Companies use special dividends when they don’t want to create an expectation in the market that higher dividends have been baked in, so this isn’t as strong a signal of growth as would’ve been the case had the ordinary dividend increased in line with earnings. They indicate that part of the special dividend is the receipt of proceeds from successful litigation, but that doesn’t really explain why they were so conservative in the payout ratio for the ordinary dividend in this period.

Other metrics that I think are worth highlighting include 4% growth in the number of active retirement members, as well as a 23% jump in umbrella assets under management. There’s also this pretty interesting chart in the analyst presentation that shows how they think about the different types of flows:

No profits at Aveng this year (JSE: AEG)

Construction companies are only as good as their worst projects

Aveng has flagged that they will report a headline loss per share for the year ending June 2025. Quite how bad it will be, we just don’t know yet. Either way, it’s a very ugly swing vs. HEPS of A$29.6 cents in the comparable period.

As is usually the case for construction companies, there are just a couple of projects letting the whole team down. Both of them are in McConnell Dowell, which Aveng is trying to figure out what to do with that business from a strategic perspective. If you’re looking to sell or separately list something, you want to do it when the going is good, not when there are losses.

Within McConnell Dowell, the New Zealand and Pacific Islands operations have grown their profits. The Australian side was break-even in the interim period and deteriorated in the second half, with the Kidston Pumped Hydro project costs running away from them. The weather has been a major factor here, leading to a delay in the work by a number of months. Whether or note they can recover any of these costs through commercial claims and negotiations with the client remains to be seen. Other than the Kidston project, the business is profitable. And finally, in Southeast Asia, the Jurong Region Line project is running in line with the revised project plan and cost.

Outside of the infrastructure segment noted above, Built Environs is profitable and growing. They are light on details for mining business Moolmans, which suggests that they might be having a trickier time there as well. Generally, when companies have a good news story to tell, they tell it.

Moolmans is also up for sale by the way, with negotiations in progress with interested parties. As you can see, there are a lot of moving parts for this group, with a likely outcome being a break up and eventual name change of whatever the listed entity is. At this stage, nothing is certain.

The Aveng share price has cratered this year, having lost half its value year-to-date.

Barloworld gets the green light from the Competition Commission (JSE: BAW)

Subject to conditions, as usual

Barloworld is currently under offer at R120 per share, as you are probably aware. The scheme of arrangement for this deal failed to garner sufficient support, so everything now depends on whether enough shareholders accept the offer to make it viable for the offerors. Recent results at Barloworld (and a sector peer like Bell Equipment) have made me inclined to think that more shareholders might be wiling to accept the offer than before. We will have to wait and see.

In the meantime, Barloworld has been busy getting regulatory approvals in place. The Competition Commission has approved the deal, subject to a 13.5% B-BBEE empowerment transaction being executed in Barloworld after the delisting. This is effectively to replace the empowerment that currently stems from the PIC being a shareholder, as the PIC has agreed to accept the offer.

The Competition Tribunal still needs to sign off on the deal. Although it does sometimes happen that the Tribunal disagrees with the Competition Commission’s recommendation, this is quite rare.

The offer to shareholders is open until 30 June 2025. We will know soon enough whether this thing is going ahead and I suspect that an updated view on the acceptance rate will be released in the next couple of weeks.

Lighthouse had no trouble raising R400 million in equity (JSE: LTE)

The property sector is hot once more

Property funds are popular things on the JSE. There are very deep pools of institutional capital out there, which means that high quality property funds tend to have no trouble in raising hundreds of millions of rands in the space of a morning. This is fine. The problems start when the middle-of-the-road and then low-grade funds start raising without any issues – at that point, we are in bubble territory. I see no evidence of that yet.

Lighthouse Properties is a good example of a solid local property fund, even though their investment story is centred firmly on Europe. On Monday morning, they announced that they wanted to raise R100 million through an accelerated bookbuild process, with the announcement reminding the market that the fund’s acquisitive activity has focused on Portugal and Spain.

Perhaps thanks to Carlos Alcaraz reminding everyone that the Spanish are a tenacious and talented bunch, the market responded positively and Lighthouse announced that the capital raise would up increased to R300 million. By the time the dust settled, they had actually raised R400 million at R8.20 per share – and the book was still oversubscribed at this level.

To give you a sense of pricing, the share price opened at R8.40 on the day, so this raise is at a slight discount to the prevailing market price.

Oceana hurt by fish oil prices (JSE: OCE)

There are just so many variables in this industry

Agriculture and mining are considered to be cyclical, risky businesses as they are so reliant on commodity prices that are completely outside of their control. When it comes to fishing businesses, you can then layer on the additional risks of variable catch rates and all the other challenges that the ocean is capable of dishing up. This is why you can get volatility in the Oceana share price like this:

The six months to March 2025 were rougher than the seas for Oceana. Although revenue increased by 2.9%, HEPS took a horrible knock of 43.9% and the dividend was much the same story, down 43.6%.

The main problem was global fish oil pricing, which fell based on the Peruvian anchovy resource coming back to the market. This hammered the American business from a year-on-year perspective (operating profit down 55.6%), with improved performance in South Africa (Lucky Star as the key segment, with operating profit up 35.9%) unable to offset the impact. Despite margins at Lucky Star improving, group gross profit margin fell from 34.1% to 27.8%.

To add insult to injury, the net interest expense jumped from R93 million to R144 million due to higher borrowing levels. When the operations had a tough time, it obviously only makes things worse if finance costs moved significantly higher. The pressure on the balance sheet came from strategic buying of inventory, ensuring consistent supply in an uncertain trade environment. One would hope that this will normalise in the second half of the year, as cash from operations was just R10 million in this period vs. R634 million in the comparable period.

The net impact of lower profits and higher debt is that net debt to EBITDA increased from 1.2x to 2.2x. Although the group is in compliance with all lender covenant requirements, I don’t think they can realistically run the balance sheet this hot for too long. To be fair, it looks like much of the inventory investment is to support the Lucky Star business, which is where they just can’t afford to miss out on any sales at the moment.

There’s little indication that the second half of the year will provide a significant improvement on the first half, as global fish oil prices are expected to remain under pressure. The US tariff environment is interesting, as it might assist Daybrook in that domestic market. Overall, they’ve done their best at Oceana to position the group for the best possible second half under the circumstances, with shareholders thanking their Lucky Star as usual.

A flat period at Omnia (JSE: OMN)

But not if you look at a share price chart

At first blush, Omnia’s results for the year ended March 2025 just look “boring” – revenue was up 3% and operating profit was essentially flat, while HEPS increased by 1%. This isn’t a story that will be passed down for generations.

And yet here is the share price chart over the past 12 months, with plenty of action:

Market sentiment is an incredible thing, leading to vast differences in the valuation of roughly the same underlying cash flows.

If we dig deeper into Omnia, Agriculture saw a dip in revenue of 2% and an increase in operating profit of 3%, so not much to report there. Mining was stronger, with revenue up 10% and operating profit up by a juicy 13%, with solid growth in some markets outside of South Africa as well. Sadly, Chemicals was a very different story, with a nasty swing into operating losses despite revenue increasing by 2%.

I honestly don’t have a clue how the global chemicals markets work, but perhaps I’m just feeling browbeaten from reading about “chemicals” in Sasol and now these numbers in Omnia.

In summary, the Chemicals segment was a nasty drag on earnings, bringing the group to a flat position overall despite the variance in segmental performance. This is a common situation in corporates. As a further overhang on the story, the fight with SARS still hasn’t been resolved, with Alternative Dispute Resolution proceedings hopefully being finalised soon.

It’s all about the margins at PPC (JSE: PPC)

Profits are what count

PPC has released results for the year ended March 2025. You won’t find the happy news on the revenue line, where group revenue decreased by 1.9%. But as you move down the income statement, you’ll find that HEPS more than doubled from 19 cents to 40 cents! For those who only trust cash earnings growth, you’ll be pleased to note that the ordinary dividend is up 28.5%.

What matters more to you – strong revenue growth and low profits, or muted revenue and great profits? If those are the only two options available, it’s clear that the latter is better. The holy grail is of course great revenue growth and better margins, but have you seen the state of South African infrastructure investment?

Cement volumes in the SA and Botswana segment fell 2.3%, but revenue was up 0.6% due to positive pricing moves. EBITDA jumped 31%, taking EBITDA margin 260 basis points higher to 11.0%. Most importantly, this segment is finally paying a dividend, after such a long period of being at the mercy of the banks.

In Zimbabwe, volumes were down 5.5% and revenue fell 6.7%. Despite this, EBITDA was up 26% and EBITDA margin was up a meaty 700 basis points to 27.2%. Zimbabwe has been a reliable payer of dividends (if you can believe that), up from $11 million to $13 million in this period.

The CEO talks about the Awaken the Giant strategy. Right now, they are certainly a lot more awake when it comes to profits. There is of course a practical limit to how far you can drive profit growth without revenue growth, so investors will want to see revenue increases coming through. PPC knows this, hence the decision to build a new integrated plant in the Western Cape. Although South Africa as a whole may have weak supply-demand dynamics for cement, there’s significant growth in the Western Cape and they see the opportunity there.

As a final note, finance costs were down 19.1% as debt levels dropped significantly. This is a wonderful turnaround story.

Insights from Santova’s latest presentation (JSE: SNV)

Although it deals with February year-end results, there’s much more to it

Santova recently announced the acquisition of Seabourne in the UK, giving the group deeper exposure to the eCommerce sector in Europe through a business that has been built to handle smaller, more frequent packages rather than bulkier items stored for a longer time. This is an interesting play by Santova and one that was followed up by extensive buying of shares by directors, which is always a positive sign.

The group has made the annual results presentation available to the market, with the nuance being that it includes plenty of strategic thinking in the context of the Seabourne deal. In other words, this is far more than just a normal numbers deck.

This struck me as a pretty useful slide, as it shows how companies in the logistics sector build a wider moat over time:

Unsurprisingly, the presentation is filled with references to how changeable global conditions are. It’s not just the trade war and associated risks that are relevant – it’s also the kind of wars fought with bullets and missiles that disrupt trade routes. Santova has a truly global business (only 17.1% of new client revenue came from Africa in this period), so they are exposed to the broader geopolitical environment.

And of course this is before taking into account some of the other disruptions in the sector, shown in this pretty epic slide:

Despite this high-risk backdrop, there are strong growth opportunities. eCommerce is an incredible force at the moment, shifting demand for space from retail into industrial as more orders are fulfilled from warehouses rather than stores. This is changing the game in the sector, with Santova noting that the Netherlands is the “predominant gateway” to Europe. Interesting.

Another trend they reference is “friendshoring and nearshoring” as opposed to just onshoring, which means bringing supply chains into friendlier territories even if this comes at a greater cost. Supply chain security is a higher priority than just cost of production, so that points to a more inflationary environment overall.

The bear case for Santova is ironically also the bull case, with the question being whether Europe can go from being sluggish to exciting. A knock to US exceptionalism doesn’t necessarily mean that Europe will suddenly spring into life. Revenue and profits fell in the region in the latest financial year, with Santova making the brave decision to invest in Seabourne despite the risks. Another angle to the bear case is of course the US trade lane as well, as US government policy is firmly focused on encouraging domestic consumption at this time.

Santova’s share price has climbed nearly 28% in the past month. The market is enjoying the combination of the recently announced deal and the extensive director buying. I also thoroughly enjoyed how detailed the investor presentation is, as it really is helpful in understanding all the pros and cons of the sector at the moment.

Nibbles:

  • Director dealings:
    • A director of a major subsidiary of KAP (JSE: KAP) – PG Bison, to be exact – sold shares worth R6.5 million.
    • The CFO of Sirius Real Estate (JSE: SRE) and his immediate family members bought shares worth R585k.
    • An associate of the company secretary of Cashbuild (JSE: CSB) sold shares worth R59k.
    • Although there were some directors of Ninety One (JSE: NY1 | JSE: N91) who sold vested shares, there were also a few who kept the entire amount. And of course, there were those who sold only the taxable portion. I’m calling it a draw, with no obvious pattern in the behaviour.
  • This is just a reshuffling of chairs, so I haven’t included it in the director dealings section as I don’t want to create the wrong impression that this is a trade that should be interpreted as a signal. It’s just a reminder of the sheer extent of the wealth of the Christo Wiese family that they’ve moved around some Collins Property Group (JSE: CPP) shares between family entities with a total value of around R300 million.
  • Oasis Crescent Property Fund (JSE: OAS) announced that holders of 72.5% of units in the fund elected to receive a cash dividend, while holders of the remaining 27.5% opted to receive new units instead.
  • I’m glad to see that Mpact’s (JSE: MPT) shareholder impasse regarding non-executive director remuneration has been solved. There was an insane situation for a while where directors were appointed to the board of a subsidiary instead of the holding company as that was the only way for them to be paid. Perhaps the weirdness between Mpact and Caxton (JSE: CAT) is behind us.
  • The co-founder and honourary chairman of Mr Price (JSE: MRP), Stewart Cohen, will be retiring from the board in August this year. He co-founded the business in 1985, so it really has been an incredible journey. Cohen turns 80 this year and is ready to step away from formal duties, freeing up more time for for the Mr Price Foundation and other social projects. He will give strategic input to management in a non-remunerated advisory capacity.
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