Adcock Ingram went from bland cautionary to a full-fat offer in just one day (JSE: AIP)
The share price closed 18% higher for the day
As the old joke goes: well, that escalated quickly. In literally the space of a day, Adcock Ingram went from releasing a bland cautionary to announcing the full terms of an offer by Natco Pharma and a planned delisting of the company.
The price is a lovely R75 per share in cool, hard cash. At the start of the week, Adcock Ingram was trading at around R50 per share. Now that’s a takeout premium! The exact premium to the 30-day VWAP is 49.6%.
Bidvest is going to stick around as controlling shareholder with a 64.25% stake, while the acquirer Natco Pharma is going to hold 35.75%. When you consider that they are paying this price for only a significant minority stake (also called “negative control” instead of outright control), it’s an even more impressive outcome for current shareholders. The position before this transaction is that Natco Pharma owns 0.9% of the shares in Adcock Ingram.
As there is a specific desire to take all the other shareholders off the register and delist the company, this will be structured as a scheme of arrangement rather than an offer. In other words, if they get the requisite approval, it will be binding on all shareholders (rather than an offer that each shareholder chooses to accept or not).
Natco Pharma is an Indian company listed on two exchanges in that country. They’ve been around since 1981 and operate across 50 countries. Together with Bidvest, they are looking to find new opportunities in Africa through Adcock Ingram.
There are the usual Ts & Cs in this deal related to conditions like regulatory approvals, as well as material adverse change clauses that protect the buyer in the event of the net asset value or EBITDA dropping by more than a specific percentage.
This is a classic example of a clean, easy takeout offer. It’s all in cash, it’s at a fat premium to the current price and I can’t see any reason at all why shareholders wouldn’t jump at this thing. The scheme circular with the fair and reasonable report from the independent expert will be an important supporting argument for the deal.
AECI’s HEPS more than doubles, led by AECI Mining and a drop in finance costs (JSE: AFE)
Large impairments in this period are excluded from HEPS
AECI is in the process of executing major restructuring activities. The share price has done incredibly well this year, closing 4.4% higher on Wednesday to take the year-to-date move to 24.7%. Nice!
Backing this up is an increase in HEPS of between 129% and 136% for total operations. I would love to be able to tell you what HEPS from continuing operations is expected to be, but for some reason they don’t disclose that.
Profit from continuing operations is expected to dip by 6%, but that includes a massive R320 million impairment charge that would be excluded from HEPS.
The best number to consider is probably the 24% increase in EBITDA from continuing operations, driven by a 14% increase in AECI Mining and a 59% improvement in AECI Property Services and Corporate (a cost centre). AECI Chemicals suffered a 32% drop in EBITDA. Adding to the overall EBITDA jump, the company enjoyed a decrease in net finance costs from continuing operations of 36%.
Although we still need plenty of details here to properly understand the numbers, the direction of travel is clearly up. When restructures go well, there’s money to be made in the market. Those who took a punt on AECI coming into this year are certainly smiling!
Strong numbers as usual from Karooooo, but watch that rate of subscriber additions (JSE: KRO)
Guidance for FY26 is unchanged, with one quarter behind them
Karooooo has released its first quarter results. It features a lot of growth rates in the usual range of mid- to high-teens. For example, the number of Cartrack subscribers increased by 17%, subscription revenue was up 18.4% (in ZAR) and the logistics B2B business grew by 19.8% (also in ZAR).
The number that I don’t like as much is net Cartrack subscriber additions of 84,013, which was only 11% higher than net additions in the comparable period. If the number of net new subscribers is the same every period, then the overall rate of growth will slow down considerably over time as the subscriber base gets larger. It’s therefore important for the number of net additions to be growing as quickly as the underlying number of subscribers, otherwise we get to a point where growth slows down (and the market doesn’t like that in a growth stock).
In terms of profitability, Cartrack’s operating margin was 100 basis points higher at 29%, which means that group operating profit was up 17%. Karooooo is a capital-intensive model in terms of telematics devices, but this growth in profit was good enough to take the net cash position up from R838 million as at February 2025 to R1.1 billion as at of May 2025.
Guidance for the full year is subscription revenue growth at Cartrack of between 16% and 21%, with operating margin of 26% to 31%. The variability in margin is the thing to watch, as this introduces uncertainty into expected earnings. Earnings per share is expected to be between R32.50 and R35.50.
The share price is flat year-to-date, with the market having reacted to the news of the CEO selling down a portion of his stake. To be fair, he still has a gigantic amount of value in the company and is a committed founder, so the bigger thing to focus on is earnings growth.
It looks as though we may finally see a deal on the table for Metrofile (JSE: MFL)
But at what price?
The old adage in the market is to buy the rumour and sell the deal. With Metrofile closing nearly 10% lower on Wednesday, some punters chose to sell a deal that isn’t even finalised yet!
We now know that the buyer that is at an “advanced stage” of negotiations is a special purpose entity in Delaware held by WndrCo LLC, along with James Simmons and some high net worth individuals.
As you can guess from the spelling and almost complete lack of vowels, WndrCo is a tech company. Their particular focus is “consumerisation of software” – whatever that might mean. Metrofile’s business model of document storage is about as technologically advanced as those cars they drive in The Flintstones, so perhaps WndrCo has looked at the endless boxes of docs and wondered if there’s a way to do it better. At least that would explain the name!
At this stage, no price has been announced. Although the share price drop is odd in the context of this announcement, it was on thin volumes.
June was a tough trading month for clothing retailers, but Mr Price came through in one piece (JSE: MRP)
I think this share price has been unfairly treated by the market this year
The entire clothing sector has had a pretty rough time this year. Mr Price is down 28%, so goodness knows they haven’t been spared. I’m just not sure that’s fair, as they have one of the simpler and more resilient offerings in the local sector, without all the noise of offshore holdings.
For the 13 weeks ended 28 June, Mr Price grew retail sales by 6.3%. Comparable store sales were up 3% and selling price inflation was 3.1%, so that means comparable volumes were flat or slightly negative. It won’t go down as an exciting period, but they were still in the green despite a tough June.
Just how bad was June? Well, April and May saw retail sales grow by 11.3% and 11.9% respectively. June was ugly, with retail sales down 5.1% (admittedly against a pretty strong base in June 2024). The change of season can cause all kinds of volatility for clothing retailers, as the cold weather can arrive earlier or later than expected. Later is the bigger issue, as it means that the retailer sits with a store full of warm clothes that nobody wants to buy yet.
And when stores are full, the sales start. This promotional activity to rectify the stock situation led to a 20 basis points dip in gross margin for the quarter. All things considered, that’s not bad. Mr Price is now happy with their stock position for this point in the year.
One of the most interesting things about Mr Price is the relative lack of focus on online sales. For example, total store sales increased 6.3% and online sales were up 7.6%, so there’s hardly any difference there. Online sales are just 2.4% of total retail sales. The expansion of the footprint continues, up by 31 stores on a net basis and representing a 3.7% increase in trading space.
Another important way to view the group is the split of cash and credit sales. Mr Price generates 87.5% of its sales from cash sales. Cash sales were up 6.3% and credit sales climbed 6.1%, so there’s another pretty even split for you.
In terms of underlying product categories, the apparel segment (78.6% of group sales) increased by 6%. Homeware (17.8% of group sales) grew 6.4%. Telecoms may be only 3.6% of group sales, but it registered 12.7% growth. I must highlight Yuppiechef as usual, with expanded market share in the quarter and 14 consecutive months of gains!
As for the latest trading in July, sales are up 12.9% year-on-year for the first three weeks. Importantly, gross margin is also higher. It’s all about that seasonal timing.
The second half of the year is a very interesting prospect. They have a strong base to grow against, with the two-pot numbers having come through at the end of 2024. But inflation is down and the hope is certainly that interest rates will offer more relief, so that would help. I think that Mr Price offers a pretty interesting risk/reward setup heading into the second half of the year.
The Hail Mary deal comes through for MultiChoice – and not a moment too soon (JSE: MCG)
The Competition Tribunal has given the green light for Canal+ to acquire the group
I would love to have been a fly on the wall to hear the Canal+ team discuss some of the recent financial updates that have come out of MultiChoice. The TL;DR is that the business has been doing terribly. If for some reason the Canal+ deal had fallen through, I genuinely have no idea where the bottom would’ve been for the MultiChoice share price.
Thankfully, the Competition Tribunal was happy with the public interest package put forward by the parties. This specifically covers support of local SMEs and Black-Owned businesses, along with funding for local content. I think it’s pretty clear that MultiChoice surviving is in the public interest, otherwise the local entertainment industry would be entirely dependent on SABC – yuck!
The parties reckon that they can get the R125/share deal across the line before the long-stop date of 8 October.
Northam Platinum exceeds the million ounces mark (JSE: NPH)
For sales at least, if not own-operations production
Northam Platinum released a production update for the year ended June 2025. It includes the rather delightful statistic that they exceeded total metal sales over of 1 million ounces of 4E for the first time. From a production perspective, they achieved 899,244oz from own operations and another 127,171oz from equivalent refined metal purchased from third parties.
Although own operations production was only up 0.7%, that was within guidance. Refined metal purchases decreased by 6.1%, but exceeded guidance.
It’s also worth noting that chrome concentrate production increased by 9% thanks to better throughput, feed grades and yields.
Much as there’s been a massive improvement in PGMs, Northam “remains internally focused” and they’ve reminded the market of the uncertain global outlook. That’s exactly when you want to be invested in the sector – a time of increasing profits and caution by management around what to do with the cash.
The share price is up 129% year-to-date!
Santam sets its sights offshore with a Lloyd’s Syndicate deal (JSE: SNT)
This adds to the existing offshore businesses
Santam already operates internationally through Santam Specialist Solutions and Santam Re. They are adding to this with the launch of the Santam Syndicate, through which they will be tapping into the Lloyd’s infrastructure of specialist insurance classes.
Essentially, this gives them access through Lloyd’s licensed to trade in 77 insurance and 200 reinsurance territories across the world. To get it done, they’ve appointed the leadership team in London and will add to the team as required. This is expected to have a small negative earnings impact in the first year as they get things off the ground.
Personally, I’m in favour of offshore expansion that takes the form of a ground-up strategy rather than an acquisition of a large existing business at a silly price. Just look at what OUTsurance achieved in Australia by taking the patient approach!
This deal is also a good example of how the broader Sanlam – Santam group always seems to be out there doing interesting things on the global stage. There’s a reason why they have performed so well vs. peers.
Spear REIT is sniffing around the acquisition of further properties in the Western Cape (JSE: SEA)
If they go ahead, these would be significant deals
One thing about Spear REIT: they sure are consistent. The fund is focused entirely on the Western Cape and they have no plans to change that. The latest cautionary announcement indicates that they are considering two separate deals to acquire property in the province. The announcement doesn’t give any details on the type of property.
In terms of size, each deal would separately be big enough to be classified as a Category 2 transaction, which means a value of at least 5% of Spear’s market cap. For context, the current market cap is over R4.2 billion, so each deal is likely worth a minimum of R210 million.
As always, there’s no guarantee of a deal happening at this stage.
Profit-taking in the market on Vodacom after the quarterly update – but why? (JSE: VOD)
If anything, this looks better than we’ve seen in ages
Vodacom is up 31% year-to-date. That number was a lot better until Wednesday, when the share price closed 6.9% lower in response to a quarterly update. There’s nothing wrong with the update itself, so I think it’s likely that the market just jumped at the opportunity to take profits after such a strong run. After all, a mid-teens P/E isn’t where you would expect to see Vodacom trading!
Group revenue grew 10.6% as reported, or 12.7% on a normalised basis. We need to dig deeper of course, as this number is just a function of the mix effect of the overall group. For example, South Africa was up 3.2% as reported, while Egypt managed 34.2% and International was good for 10.2%.
That number in Egypt is a big deal. We are used to seeing substantial local currency growth, which is usually diluted into nothing (or even a negative) by the sharp depreciation of African currencies. With the dollar taking a breather at the moment, African currencies are being given a fighting chance – and this is a major reason for the rally in telecoms. Egypt’s normalised (i.e. constant currency) growth was 44.3%, so there’s still a negative impact from forex, but not to anywhere near the same extent as before.
The major growth drivers are all heading in the right direction, like data usage and fintech services linked to smartphones. It all looks decent, hence why the likeliest explanation for the drop in price is punters taking profit after a wild rally this year (by telco standards).
Nibbles:
- Director dealings:
- A director of Brait (JSE: BAT) bought shares worth R7.4 million.
- A director of a major subsidiary of Capital Appreciation (JSE: CTA) sold shares worth around R780k.
- A director of a major subsidiary of PBT Group (JSE: PBG) bought shares worth R6.8k.
- Here’s a win for Renergen (JSE: REN) in the deal process around the ASP Isotopes offer. The Competition Commission has approved the offer with conditions that were acceptable to ASP Isotopes. There are other conditions that still need to be met by 30 September 2025 for the offer to go ahead. This date can be extended if needed.
- Orion Minerals (JSE: ORN) is most of the way through the issue of shares under the latest placement with “sophisticated and professional investors” – i.e. not the share purchase plan offered to the broader market. They’ve issued shares worth A$2.63 million for cash under that placement, with another A$0.5 million to go. It’s then all about the share purchase plan and how much traction they get.
- Ibex Topco, the charred remains of Steinhoff, sold its stake in Pepkor (JSE: PPH) in a market process that saw its stake decrease from 28.48% to just 0.19%. The only way you can offload a stake of this size in the market without absolutely destroying the share price is by working through a bookrunner who gets institutional investors to register their interest to acquire shares. Reuters reports that the shares were priced at R25.45 per share, which is a discount to the current market price of R26.87.
- Trustco (JSE: TTO) has renewed the cautionary announcement related to its potential delisting from the current exchanges and subsequent listing on the Nasdaq. They are still busy finalising who will be signing the August 2024 audit report, as there was a change in rules that necessitated a ruling from the JSE around the acceptability of the auditors.
- Not that I think too many people are exactly paying attention to Numeral (JSE: XII) at the moment, but the company released a change to the earnings for the year ended February 2025 that were published on 1 July in a SENS announcement. We are talking about a total difference to HEPS of $13k, which doesn’t even impact the per share numbers to the third decimal point!
