Ghost Bites (Choppies | Conduit Capital | Invicta | RMB Holdings)

Choppies finally announces the Kamoso deal (JSE: CHP)

I just wish I understood it

At long last, we have a category 2 announcement for the Choppies – Kamoso deal. A category 2 transaction under JSE rules is a deal that is big enough to warrant a reasonable level of minimum disclosure, but not big enough to justify a shareholder vote.

Interestingly, in a category 2 under Botswana Stock Exchange rules, the audit committee needs to confirm that the terms of the transaction are fair to shareholders. Reading further, this also happens to be a related party transaction (as shareholders of the target include the CEO and another important figure at Choppies), which brings the need for a fairness opinion more in line with JSE rules. In this case, it looks like the opinion is prepared by the audit committee rather than an independent expert, although Grant Thornton did assist with the due diligence and valuation.

I must be honest with you: I don’t know what in the Gaberone is going on with these numbers. I read the announcement four times and I would welcome any corrections. Or an explanation. Anything, really.

High up in the announcement, it notes that Choppies will acquire 76% of Kamoso Group for two pula. Yes, just two Botswana pula. The shareholder loans of P28 million are also moving across. Fine, except a table further down in the announcement notes that the EBITDA of Kamoso is P66 million and the enterprise value is P340 million, so that’s an EV/EBITDA of 5.15x. A marketability discount of 15% has then been applied to the company. This suggests an equity value of P116 million that they are paying two pula for. Not two million pula, but two pula.

To add to my confusion, there is then P81 million of goodwill from this transaction. This implies that they paid a whole lot more than the net asset value, except they didn’t. Or they did. I give up.

The remaining 24% will continue to be held by the Botswana Development Corporation. Perhaps they understand the announcement.

The number that I do understand and will highlight is the net loss at Kamoso of 9 million pula. That EBITDA disappears rather quickly as you move further down the income statement.

The rationale for the deal is that Kamoso Group has a liquor licence, which solves a major problem for Choppies as the only major grocery retailer in Botswana without a liquor licence. Kamoso also has a hardware business, which is part of the Choppies strategy.

Seriously – if you understood the numbers, tell me. I’ll update this and credit you for making sense of it.

Conduit Capital finalises the disposal of CLAH (JSE: CND)

All conditions precedent have been fulfilled

In December 2022, embattled Conduit Capital announced the disposal of CLAH to Affinity for R20 million. It’s taken a long time to address all the outstanding conditions in the deal, which led to a couple of extensions for this deal.

All conditions have finally been met, with a disposal date of 3 July.

Another offshore deal for Invicta (JSE: IVT)

It’s been a busy period of deals for the group

Hot on the heels of the deal in Singapore that was recently announced, Invicta has given shareholders the news of another offshore transaction.

Within the Replacement Parts Auto – Agri business segment, Invicta has acquired 100% of the shares of Imexpart Limited (Imex) in the United Kingdom. This is a leading independent truck parts distributor, providing parts for a multitude of brands ranging from Volvo and Iveco trucks through to MAN coaches and buses. They also do parts for cars and vans, among other things.

The customers base is primarily in the UK and Ireland, which gives Invicta further geographical diversification in line with the group strategy. The benefit that Invicta brings to the table is a strong procurement capability, which can help improve gross margin at Imex. There are also Imex products that can be sold into other Invicta operations.

The effective date of the deal was 1 July and no financial information has been given, as this is too small a deal to be categorised and hence Invicta has made a voluntary announcement.

RMB Holdings is keeping its lawyers busy (JSE: RMH)

Beyond the Atterbury dispute, there’s also a fight underway under s164 with shareholders

We’ve reached a point on the JSE where a company cannot do a scheme of arrangement without attracting a group of opportunistic shareholders looking to apply s164 and get paid out fair value in the process. Now, if the share price is well below fair value, that’s a profitable strategy.

The law allows this, so it’s a clever use of s164. Companies hate it for obvious reasons, constantly lobbying for the rules to change. RMB Holdings has taken it a step forward, joining the Minister of Trade and Industry to the court action as the company looks to challenge the constitutionality of certain aspects of s164 of the Companies Act. The Minister will participate in the proceedings.

There were initially five dissenting shareholders to the special resolution back in July 2022. One withdrew the demand before the special dividend payment in October 2022, as a s164 action means you lose your entitlement to any dividends. Two have been settled now at 197.76 cents per share (with at least one of those entities linked to asset manager Chris Logan) and two have decided to go to court. The court action is by shareholders holding 13.27 million shares, so there’s a lot of money at stake here.

At some point, the courts will need to have a close look at how this section is being used in practice, with a common argument being that shareholders who buy after the initial announcement but before the meeting shouldn’t be allowed to use s164 as the behaviour is clearly opportunistic. I’m not sure if that timing applies to the shareholders in this court action, but all will no doubt become clear in months to come.

Either way, being the law firm on retainer from RMB Holdings is not a bad gig.

Little Bites:

• Director dealings:
  • Encha Properties has sold 4.792 million shares in Vukile Property Fund (JSE: VKE), so it has made good progress with the intended sale of between 5.5 million and 6.0 million shares. The company is an associate of a director of Vukile and is the fund’s B-BBEE partner. The sale is being undertaken to deal with loan arrangements with Investec Bank.

• If you’ve been wondering about the latest at Steinhoff (JSE: SNH), the next step is an extraordinary general meeting to vote on things like the dissolution of the company. The end is nigh.

• In the very unlikely event that you are a Deutsche Konsum REIT (JSE: DKR) shareholder, the latest dividend is 247.61640 cents per share based on the exchange rate used in the calculation. It really does have the most epic bid-offer spread on the JSE, with bids at R0.03 and offers at R999.98. I truly have no idea why this thing is listed.

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