Ghost Bites (Afrimat | BHP | Choppies | Steinhoff)

Afrimat issues a cautionary (JSE: AFT)

We may not have any details, but this is important

Afrimat has a long history of dealmaking and an enviable track record when it comes to capital allocation. Deals are part of the strategy here, so Afrimat issuing a bland cautionary announcement deserves a spot up here rather than in Little Bites.

The negotiations are regarding a “potential transaction” and we have no idea if Afrimat is possibly buying or selling an asset here. Time will tell.

Even big companies like BHP really botch it sometimes (JSE: BHP)

There have been major mistakes in the HR calculations in the Australian businesses

Leave days and public holidays in Australia are clearly more treacherous than the eight-legged beasts that call the country home. BHP has figured out that leave was incorrectly deducted for employees on public holidays since 2010, affecting 28,500 employees with an average of 6 leave days in total.

The cost? A whopping $280 million to fix this issue.

It seems that OZ Minerals has the same problem. This is the business that BHP acquired in 2023. I can’t help but wonder if they used the same HR system and there was a problem in it somewhere.

Either way, that’s an embarrassing and expensive problem.

Choppies launches a rights offer (JSE: CHP)

The capital raise isn’t for growth reasons, but rather to repair the balance sheet

Not all capital raises are created equal. Some are for growth purposes, where companies need capital to achieve their ambitions. Those are few and far between these days, though there are good examples (like Purple Group). Others are purely to fix a balance sheet, ranging from less urgent raises (like this one at Choppies) through to survival raises like the one coming at Nampak.

Choppies wants to raise P300 million (that’s Botswana pula), or roughly R430 million. The rights offer pricing is a 10% discount to the 30-day VWAP up until 31 May 2023.

Most of the raise will be used to extinguish shareholder loans from Ram Ottapathu and Farouk Ismail, as well as Shanta Retail Holdings. There is also P126 million earmarked for a reduction in bank debt.

Ottapathu and Ismail have agreed to follow their rights, so there’s effectively a roundtrip of cash here that converts their loans into equity. Commitments from major shareholders to follow their rights come to P149.8 million.

The other half of the raise is underwritten by Ivygrove Holdings (P120 million) and Export Marketing (BVI) Limited (P35 million). Each of the underwriters will receive a 1% fee for the pleasure.

Across the commitments and underwritten amounts, the raise is effectively fully spoken for. Of course, investors who want to be avoid being diluted at a 10% discount can follow their rights, which means the underwriters wouldn’t get the full allocation of shares.

Steinhoff – how many more times could I warn you? (JSE: SNH)

Down 15.6% to 27 cents a share, it is now overvalued by 27 cents

The directors of Steinhoff have been explaining that the equity is worthless for a while now. Despite this, desperate shareholders have been trying hard to make the process difficult, hoping that a miracle will somehow pop out of them.

Even before the latest capitulation in the Pepkor share price, the equity at Steinhoff wasn’t enough to cover the debt. Can you imagine how bad it looks now?

You won’t need to imagine. You can now watch it play out. After the WHOA restructuring plan was accepted by creditors and not by shareholders, an activist shareholder approached the court to appoint a restructuring expert. The court said no, referencing the WHOA confirmation hearing to be heard on 15 June.

Now, I guess there’s a chance that the court is simply deferring to that hearing, as the WHOA plan being rejected by the court would presumably lead to an expert being appointed anyway. In my opinion, there’s a far greater chance of the plan being accepted by the court and the equity holders being left with nothing.

Little Bites:

• Director dealings:
  • The CEO of Clicks (JSE: CLS) has bought a chunky R3.5 million worth of shares in the company.
  • An associate of the CEO of Fairvest (JSE: FTB) has bought B ordinary shares in the company worth R983k.
  • Various executives at Adcorp (JSE: ADR) have bought shares collectively worth R344k.
  • A director of Visual Holdings (JSE: VIS) obviously wasn’t paying attention when the disclosure rules were explained, having bought numerous shares in January and only reporting it now. There’s a long list and the company decided that putting a total at the bottom wasn’t important either, but it looks like roughly R100k.
  • I don’t mention it each time or you’ll be reading the same thing every day, but be aware than an entity associated with directors of Ninety One (JSE: N91) buys shares in the company almost every day.

• Between December and May, Southern Sun (JSE: SSU) repurchased 3.4% of its shares in issue at an average price of R4.47 per share. The current price is R4.33 as most local shares have been under pressure this year. The total capital allocated to this initiative thus far is R226 million and there is still authority in place to repurchase another 16.6% of shares that were in issue at the time the authority was granted.

• Altron (JSE: AEL) is in the process of selling the ATM hardware and support business of Altron Managed Solutions to NCR Corporation. All regulatory approvals have been received, with the final condition precedent being a VAT registration for a newly-formed South African company. The finalisation date for the deal has been moved out by a month to 30 June to enable this to be concluded.

• Mpact (JSE: MPT) is still having a tough time getting critical special resolutions approved at its AGM, like the financial assistance and non-executive director remuneration resolutions. I can only assume that Caxton is still voting these resolutions down. Mpact has made a plan before at subsidiary level to get around this issue but it really is difficult to justify Caxton’s behaviour in this investment, ranging from inflammatory SENS announcements through to voting down key resolutions for the company to function.

• African Equity Empowerment Investments (JSE: AEE) has released the circular for the unbundling of its entire stake in AYO Technology (JSE: AYO).

• Datatec (JSE: DTC) has released a circular related to the scrip dividend alternative. The pricing will be based on the 30-day VWAP during the period ending on 3 July 2023, so we don’t know what that will be yet. As a reminder, this is an election by shareholders to receive more shares rather than a cash dividend.

• Safari Investments (JSE: SAR) is changing its year end from March to June to align with its new parent company, Heriot.

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