Ghost Bites (Anglo American | Investec | Murray & Roberts | Nampak | NEPI Rockcastle | Oceana)

Anglo takes another step towards low carbon (JSE: AGL)

The goal is to reduce emissions in the steelmaking process

Anglo American has put together a deal with H2 Green Steel in Sweden that will see the Swedish company trial Anglo’s premium quality iron ore from Kumba in South Africa and Minas-Rio in Brazil as feedstock for a direct reduced iron production process.

If H2 gets this right, they will have created a plant in Sweden that would reduce CO2 emissions by up to 95% in the process vs. traditional steelmaking!

Investec and Rathbones to create the UK’s leading discretionary wealth manager (JSE: INL | JSE: INP)

The merged entity will have £100 billion in funds under management and administration

Investec is taking a major step in its UK business that will see Investec Wealth & Investment combined with Rathbones to create the biggest discretionary wealth manager in the UK.

The structure will see Rathbones acquire the business from Investec and issue shares to pay for it, which will take Investec to an economic interest in Rathbones of 41.25% and voting rights of 29.9%. The shares are locked up for two years and Investec can partially sell the stake in years three and four. Investec is also not allowed to acquire more shares in Rathbones or make an offer for five years.

The implied equity value for Investec’s business under this transaction is £839 million.

The companies believed that annual synergies from the transaction will be £60 million. There are many other strategic benefits to the deal, including a stronger client proposition and larger distribution power.

The Rathbones brand will be retained and the Investec Wealth & Investment brand will be phased out over time.

Murray & Roberts shareholders say yes to Bombela sale (JSE: MUR)

No surprises here – the balance sheet needs help and this is a quick win

Murray & Roberts needs to sort out its balance sheet. This means that non-core assets need to go, particularly those offering a low return on capital.

Building infrastructure is what the company should be doing, not owning it. Recognising that point, Murray & Roberts agreed to sell the Bombela Consortium (Gautrain) to Intertoll International Holdings. The net proceeds to Murray & Roberts would be R1.26 billion if shareholders said yes to the deal.

They did, in fact, say yes. I am not surprised at all that it received “overwhelming” support as Murrays really needs the capital. This will be used to reduce debt, which will now be R1.39 billion after the repayment. Around 10% of that debt balance is related to leases, which is a lot friendlier than owing the bank.

The annual interest cost will drop by R95 million.

As a quick update on the business, Murray & Roberts confirmed that the Mining platform represents R14.1 billion of the R16.1 billion order book, with the remainder in the Power, Industrial & Water platform. I’m old enough to remember when Murray & Roberts arranged a fancy investor day with presentations by each platform.

That was before the business (and share price) imploded:

Nampak buys some time (JSE: NPK)

And time is money, literally

As highlighted by its recent results update, Nampak is still in serious trouble. With its earnings being crushed by forex losses, the company isn’t making any progress in reducing its debt.

The latest news is positive in terms of keeping Nampak alive, though it sure does come at a cost. There was a facility of R1.35 billion partially due on 31 March 2023 which has had its maturity date extended to 30 June 2024. There are two different structures that make up that amount and both have been moved to that date.

What does this cost? Well, there’s a fee of 0.43% payable as an extension fee (R5.8 million) and the far more onerous term is that the original funding cost of 5.25% for the US Private Placement Noteholders (going back to 2013 when rates were much lower) has been ramped up to a fixed rate of 12.00%.

Even Jerome Powell would be taken aback by that hike!

On the revolving credit facility, rates are increasing by 86 basis points.

That’s not all, folks. The restructuring is subject to Nampak executing a rights offer that will be sufficient for a R350 million debt repayment by the end of September 2023. There will also need to be asset disposals of at least R250 million by the end of December 2023.

Finally, Nampak is required to finalise term sheets for the refinancing of long-term funding by 15 June 2023.

Nampak’s market cap is R650 million, so a rights offer of sufficient magnitude will be hugely dilutive for shareholders. This announcement came out after the close of play, so we don’t know yet what the market will think of this news.

Positive news for the NEPI Rockcastle balance sheet (JSE: NRP)

The scrip dividend was well supported and a “green” facility has been raised

Scrip dividends are useful cash retention tools, with companies offering to issue additional shares in lieu of a cash dividend. To entice shareholders to choose the shares rather than the cash, they frequently sweeten the deal by making the share issue more valuable than the cash dividend.

Property funds are particular fans of this strategy, as it helps them retain cash and reduce debt. This has worked for NEPI Rockcastle, where holders of nearly 85% of the shares in the company elected to receive a scrip distribution rather than a cash distribution.

Also, the company has secured five-year “green” portfolio financing of €200 million, which will be used to pay down the revolving credit facility that was utilised for recent acquisitions. This will restore the revolving credit facility to €620 million.

NEPI Rockcastle has now reduced its gearing below 35%.

Oceana completes the sale of Commercial Cold Storage (JSE: OCE)

The deal was implemented on 4 April 2023

Oceana has concluded the transaction to sell Commercial Cold Storage Group to a consortium of buyers that includes a large infrastructure fund and various other parties. These consortiums can sometimes change during the course of deal implementation, like in this case where an entity linked to Mcebisi Jonas has replaced the previously announced B-BBEE partner.

With all conditions precedent now fulfilled or waived, the R760 million deal is effective.

Little Bites:

• Director dealings:
  • Value Capital Partners has bought another R35.6 million worth of shares in Sun International (JSE: SUI) and shares in Metair (JSE: MTA) worth nearly R34 million.
  • An associate of a director of Hudaco (JSE: HDC) has sold R25.4 million worth of shares as part of a diversification plan. The shares were originally related to a sale of businesses to Hudaco.
  • The CEO of Standard Bank (JSE: SBK) sold all the shares received under an employee share scheme (even the shares received after tax) and then sold another almost R10 million worth of shares for good measure.

• I’m not sure what the plan is at Conduit Capital (JSE: CND), but there are two new directors on the board, one of whom is part of a private investment company in the US.

• One needs to be careful with bland cautionaries. In these announcements, companies tell the market that something is going on that might be material, but there are no details. It’s rare to see two in one day, with Finbond (JSE: FGL) and Primeserv (JSE: PMV) both releasing such announcements. It’s inconceivable that the companies are talking to each other, so I think the timing is a coincidence.

• Richemont’s (JSE: CFR) decision to simplify its listing structure was approved by shareholders, with the depository receipt programme in South Africa being abandoned in favour of Richemont’s A shares being listed on the JSE as an inward listing.

• Shoprite (JSE: SHP) has become the latest company to list on A2X, an exchange that provides a secondary venue for trading of shares. This means that the JSE remains the primary regulator of the listing, but the shares can be traded in more than one place.

• The chairman of AYO Technology (JSE: AYO) – Advocate Wallace Mgoqi – has sadly passed away. This isn’t a happy time for the board of AYO, with the settlement agreement with the PIC having dominated recent headlines.

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