Ghost Bites (Aspen | Ellies | Northam Platinum – Royal Bafokeng Platinum | PBT Group | Shoprite – Massmart)

Aspen takes a big step for vaccines in Africa

This deal includes the receipt of $30 million in funding

Back in August, Aspen announced an agreement with the Serum Institute of India that would allow Aspen to manufacture, market and distribute four routine vaccines in Africa under license from Serum.

Before you wonder about whether this is a Covid product long after Covid has gone away, you can feel better about the fact that these are Pneumococcal, Rotavirus, Polyvalent Meningococcal and Hexavalent vaccines.

I’m no doctor, but ctrl-F “Covid” in the announcement yields no results, so that’s good news.

To help fund this 10-year deal with Serum, Aspen had been negotiating for funding with the Bill & Melinda Gates Foundation and the Coalition for Epidemic Preparedness Innovations (CEPI).

The exciting news is that $30 million in funding will be received ($15 million from each of those parties), which supports this initiative and creating regional vaccine manufacturing capacity that would put Africa in a better position going forward for future public health emergencies.

The restructuring of Ellies is an expensive process

There are glimmers of hope in the operations, although they are still making losses

Ellies has released a trading statement for the six months ended October. The headline loss per share is expected to be between -4.17 cents and -4.99 cents, which gives an interesting range vs. the loss of -4.36 cents in the comparable period.

The restructure process has had an impact of R18 million, which equates to -2.24 cents per share. This suggests that things are looking better at operational level, albeit still a loss-making reality.

This is confirmed by the further commentary, which notes revenue up by 5.6% and gross profit marginally higher than the comparable period. Operating costs (excluding retrenchment costs) have been contained below inflation.

Ellies has signed a term sheet with its bankers to restructure the working capital facilities. There are other negotiations to “support the business” in areas of substantial growth for products and services, which probably means the introduction of strategic partners – we can’t be sure until any proper details are announced though.

Interim results are expected to be released on 14 December.

The share price has been ugly this year, losing half its value in largely one-way traffic:

Northam juices up the Royal Bafokeng offer

Cash is king and Northam is putting more of it on the table

NB: this is not an increase to the offer price for Royal Bafokeng Platinum. Instead, Northam Platinum is increasing the cash element of the offer and reducing the share-based element accordingly.

The overall impact is that the cash portion of the offer has increased from R10 billion to R17 billion. Expressed on a per-share basis, the cash consideration is now between R92.48 and R172.70 per share, depending on the level of acceptances.

The total offer price is R172.70, which is unchanged as highlighted above.

The trick here is that if Impala Platinum doesn’t accept the offer for its current shareholding in the company of 40.71%, then all other shareholders that accept would be paid R172.70 in cash.

Northam is trying hard to outfox Impala Platinum in this deal and a greater cash component is another step in that direction.

PBT pulls off a smart deal with Sanlam

The keys to the B-BBEE funding structure have been passed to the right place

PBT Group is a successful tech consulting company that should be running a tight balance sheet, as this is essentially a management consulting model that focuses on selling time.

Despite this, the need to have the right empowerment credentials is a reality in the South African business landscape, so investors have been forgiving of a preference share funding structure that saw PBT Group providing funding to Yonex Investments (a B-BBEE investment entity).

In a smart move, PBT Group has managed to offload this preference share to Sanlam Investment Management for R53.3 million. This is a perfect example of capital allocation discipline, as PBT Group should be chasing a return on capital that is much higher than the yield on the preference share. In contrast, Sanlam Investment Management is looking for yield instruments that offer diversified exposure.

In other words, the deal makes sense for all involved, as Sanlam is a far better owner of these preference shares.

Prior to the disposal, PBT will receive a dividend of R1.4 million on the preference shares. A special distribution of R31.5 million will be paid to PBT shareholders after this deal closes. If you’re wondering where the rest of the money went, it’s important to note that a prior special dividend was higher than the value of non-core asset disposals that had been achieved by that time. There’s effectively a catch-up process underway here.

Importantly, PBT Group still holds R133.1 million in non-core assets. With a market cap of under R1 billion, that’s a substantial special dividend if PBT can get the remaining assets sold.

The Competition Commission has ruled on Shoprite – Massmart

Shoprite can buy most of the intended stores, but not all of them

In an important step for Massmart’s balance sheet, Shoprite has been given the green light to acquire most of the stores that were part of the initial proposed transaction to acquire the heavily loss-making cash and carry business from Massmart.

The competition authorities determined that 15 stores should be excluded from the deal, so Massmart will need to try and sell them off separately.

Shoprite is allowed to acquire 42 Cambridge Food and Rhino Cash and Carry stores, two Fruitspot facilities, the Massfresh Meat business and 12 Masscash Cash and Carry stores.

The effective date of the transaction is 9 January 2023.

I remain a bit skeptical of this deal from a Shoprite perspective. The stores will obviously be renovated and rebranded as Shoprite (and probably Usave) stores, so this was really a process of just securing the sites. Still, it seems like an expensive exercise just for that, as the stores would’ve likely gone bankrupt anyway and the space would’ve become available for “free” from a Shoprite perspective.

Little Bites

• Director dealings:
  • An executive of Gold Fields sold shares worth a meaty R9.6 million.
  • A director of Stor-Age has acquired shares worth R116k.
  • Althea Grewar sold shares in Luxe Holdings worth R12 million and we have to assume that the buyer is Mohamed Holdings, which now owns 34.99% of the company.
  • A director of Sable Exploration and Mining has sold shares worth R808k, with PBNJ Trading and Consulting having increased its stake in the company to 38.4% and having triggered a mandatory offer a well. We can’t be sure if PBNJ bought the shares sold by this director but it seems likely.

• Marshall Monteagle PLC released results for the six months to September 2022, reflecting an increase in revenue of 53% and a jump in profit before tax on trading and property operations of 77%. Net of revaluations and other moves, the group is in a loss-making position. The headline loss per share of $0.069 is down from the profit of $0.01 per share in the comparable period. Despite this, there’s a dividend of $0.019 per share.

• The general offer by Heriot to purchase Safari shares was accepted by holders of 7.6% of Safari shares in issue. Heriot and its concert parties now hold 40.7% of total Safari shares in issue.

• Tharisa released the results of the private placement of bonds related to the Karo Platinum Project. The company was looking to raise $25 million and managed to attract applications of $31.8 million for the bonds being listed on the Victoria Falls Stock Exchange. This is a great result in the strategy to fund this open-pit PGM asset located in the Great Dyke in Zimbabwe.

• After announcing that current CFO Charl de Villiers will be taking the top job at Libstar as CEO from January, Terri Ladbrooke as been appointed as interim CFO. This is an internal appointment.

• In anticipation of the potential loss of REIT status, Fortress REIT Limited has changed its name to Fortress Real Estate Investments Limited

• Mantengu Mining has concluded its rights offer to raise R15 million, with 77.69% of the new shares being allocated to the underwriters. This means that other shareholders didn’t exactly fight each other to get to the front of the queue, with applications for only 22.31% of the available shares.

• In a role that might not be the easiest to fill based on everything going on with the company, Conduit Capital is looking for a new non-executive director and Chairperson of the Audit and Risk Committee, after Nonzukiso Siyotula resigned from the role.

• Rodger Walters has been appointed as an independent non-executive director of RECM and Calibre Limited and as the chairman of the Audit and Risk Committee. He is currently the CFO of ASISA (the Association for Savings and Investment South Africa).

• Luxe Holdings renewed the cautionary announcement related to a potential disposal of assets to Go Dutch in a cash deal.

• Another company that renewed its cautionary is Afristrat, which is currently in a fight for its life with its balance sheet. I can’t give you the website because it appears to have been hacked and redirected.

• Sebata Holdings released results for the six months to September. Revenue is up 26% and the headline loss per share improved from -132.25 cents to -5.27 cents. The website hasn’t worked for as long as I can remember.

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