Ghost Bites (BHP | Grindrod Shipping | Kore Potash | MC Mining | NEPI Rockcastle)

BHP is finalising documentation for the OZ Minerals deal

The exclusivity period has been extended until 27 December

Well, whoever is working on this deal clearly isn’t having much of a Christmas holiday this year. Welcome to the world of corporate finance, where holidays are mainly just a myth designed to keep you motivated.

Having entered into an exclusivity agreement with OZ Minerals Limited towards the end of November, BHP has moved quickly to conduct a due diligence and confirm the proposed cash price of $28.25 per share. The outstanding step is to finalise the scheme implementation deed, for which the parties have agreed to extend the exclusivity until 27 December.

Importantly, the boards of both companies still need to sign off on the deal. It’s entirely possible that it still falls over at this stage.

Grindrod Shipping seems to be sticking around

If you’re still holding shares, be careful of liquidity

The offer by Taylor Maritime Investments for all the shares in Grindrod Shipping has closed. The important news is that not all the shareholders accepted it, which is exactly why offerors like to use a scheme of arrangement as an “expropriation mechanism” that binds the shareholders to the outcome if the requisite voting threshold is met.

Instead, we have a scenario where Taylor has moved from a shareholding of 25.29% to 83.23%. This is an awkward level, as there is not quite enough of a free float to meet JSE Main Board requirements, yet there is enough to be irritating.

The announcement warns shareholders that a delisting may still be in the pipeline. Liquidity may become problematic in this counter, so just be careful if you are sitting on a significant holding. That bid-offer spread can become very painful.

Kore Potash seems to still have support in Republic of Congo

When African governments start with nonsense, investors need to be wary

Let’s not mess around here: we are all very aware that Africa is fraught with corruption. Right here in South Africa, corruption is practically a national sport.

I was worried when Kore Potash first started reporting on what I can only call “weirdness” from the Minister of Mines in the Republic of Congo. The Minister has expressed concern at slow progress on the project, which is a little odd as Kore Potash has made plenty of progress with the Summit Consortium in putting the money and development plan together.

The Minister also complained about the administration of the local subsidiaries of Kore Potash, which led to the company hiring lawyers for two independent reviews of the corporate affairs of these subsidiaries. The reviews will be completed in January.

In the meantime, the management team got on a plane and met the Minister in the Republic of Congo, which seems to have gone well. In the world’s most carefully worded SENS announcement, Kore Potash highlighted that the Minister expressed his “thanks for how the company responded to his most recent letter” and reiterated that the company has the support of the government to develop the project.

Well, let’s hope that will be still be the case in 2023.

MC Mining extends its marketing agreement

This is a great outcome for Uitkomst

MC Mining’s Uitkomst mine produces coal of sufficient quality to be exported, but not enough of the stuff to fill a ship on a monthly basis. This previously created a frustrating situation in which the company couldn’t access the international coal market, thereby losing out on the far higher export price vs. domestic prices.

A marketing agreement with a company called Overlooked helped address this issue. The agreement was due to expire at the end of December and has now been extended to June, with the key terms staying as-is.

The way the deal works is that Overlooked handles the transportation, stockpiling and export of coal at the port. The fee for this service is 5% of the sales price, which seems pretty reasonable to me.

Notably, this is a related party transaction as the CEO of Overlooked is also a director and substantial shareholder of MC Mining.

One wonders if there is a deal coming down the line for the company to acquire Overlooked. We will have to wait and see.

NEPI Rockcastle invests further in Poland

This is one of the biggest European shopping centre deals of 2022

NEPI Rockcastle has acquired all the shares in Forum Gdansk, a large shopping centre in Poland’s sixth largest city. With a large catchment area and an occupancy rate of 93%, the property is obviously appealing.

The purchase price is €250 million, of which €50 million is vendor financing payable by NEPI Rockcastle within three years at a fixed rate of 6.5%. The rest of the purchase price was funded from NEPI Rockcastle’s cash resources and credit facilities.

The estimated net operating income of the property is €16.5 million, so that’s a yield of 6.6% on the purchase price.

In further news related to Poland, the acquisition of the Copernicus Shopping Centre became effective as of 19 December, so this means that two high quality retail assets have been added to the portfolio.

Little Bites:

• Director dealings:
  • An associate of a director of Ethos Capital has acquired shares worth R1.5 million
  • Although several directors of Zeda received shares in the company as part of the unbundling from Barloworld, the interesting news is that a prescribed officer bought another R449k worth of shares.
  • An associate of a director of CA Sales Holdings has acquired shares worth R199k
  • A director of Brimstone has acquired shares worth R41.4k

• As another reminder of what a large balance sheet actually looks like, Naspers repurchased shares worth R1.3 billion and Prosus repurchased shares worth $267 million. These amounts covered just a few days of repurchases! These repurchases are being funded from a sell-down of the stake in Tencent.

• To give some context to these numbers, Investec has repurchased shares worth R757 million since 3 October.

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