In this edition of Ghost Bites:
- Datatec crystallises some of the value in Westcon International
- The Heriot family is putting more assets into Heriot REIT
- Prosus / Naspers gives us a peek behind the curtains at earnings
Datatec crystallises some of the value in Westcon International (JSE: DTC)
A special dividend of over R7 billion is on the horizon
Datatec shareholders have been thoroughly enjoying a value unlock strategy by the company over the past few years.
Through a combination of solid performance in the underlying businesses, as well as clever disposals of assets (leading to special dividends to shareholders), the total return to shareholders over 5 years is an insane 584%!
There’s another special dividend coming soon, as Datatec has attracted an investor in Westcon International.
Westcon is the part of the group that is primarily focused on technology distribution, which means they are constantly looking for products that offer decent margins alongside the ability to generate lucrative volumes.
If you’ve been following the mess at Bytes Technology Group (JSE: BYI), you’ll know that being too focused on distributing Microsoft products makes you a sitting duck for that giant to reduce distribution commissions. Diversification is very important in this space, with areas like AI and cybersecurity offering opportunities for distributors in search of better margins.
General Atlantic clearly likes the diversification story, as they are investing a total of $400 million in Westcon. $375 million is in the form of debt that will be used to refinance a shareholder loan from Datatec. $25 million is an equity investment, with General Atlantic acquiring 5% in Westcon from existing shareholders.
If you add in the effect of warrants, they will hold 8.7% immediately after the deal closes, with the ability to increase this over time depending how the warrants pan out.
Together with existing cash on the Westcon balance sheet, the net impact is that $434 million will flow up to Datatec shareholders in the form of a special dividend. This is roughly R7.1 billion, or approximately one-third of the Datatec market cap!
Something to keep in mind is that Datatec’s interest costs will go up after this, as they are replacing internal funding with external debt priced at 9% per annum (and maturing in six years).
This is a Category 2 transaction, so shareholders won’t be asked to vote. They certainly showed their support in the share price though, with Datatec closing 5.9% higher on the date of the announcement.
Ghost Bite: Management teams who complain about a persistent discount in the share price have two choices. They can either keep complaining without doing anything about it, or they can crystallise value further down in the structure and demonstrate the discount in action. Datatec follows the latter approach, to the benefit of all its shareholders.
The Heriot family is putting more assets into Heriot REIT (JSE: HET)
Interesting deal, but pity about the tightly held shareholder register
Heriot REIT announced the acquisition of 75% of Katleho Property Investments (KPI) from two entities that are part of the Heriot family structure. One of the entities already holds 89.07% in Heriot REIT, reminding us just how tightly held this share register is.
The portfolio consists of three office parks in Gauteng. We are at an interesting point in the cycle for both Gauteng and office properties in general. To sweeten the deal for minority shareholders in Heriot, the properties are being acquired at a 20% discount to net asset value (NAV).
When you hear something like that, the first thing you need to do is check how the assets are being paid for. If it’s a share-for-share deal, then a discount to NAV is all relative. In other words, if the shares in Heriot are being issued at a similar discount, then it all comes out in the wash.
The good news is that the NAV as at 31 December 2025 was approximately R22.90 per share. These shares are being issued at R23 per share. Although that NAV is out of date by six months, it seems as though the acquisition is at a significantly higher discount to NAV than the issuance.
The deal is worth R129 million, which is very small in the context of Heriot’s market cap of nearly R7.4 billion. Even though this is a related party transaction, it’s too small to even trigger the requirements for a “small related party transaction” under JSE rules.
But because it involves the issuance of shares to a related person, it falls under the ambit of the Companies Act and requires a special resolution by shareholders.
Ghost Bite: Heriot has extremely thin trade in its shares. If the company has any plans to do something about that and unlock liquidity, related party deals certainly won’t get them there.
Prosus / Naspers gives us a peek behind the curtains at earnings (JSE: PRX | JSE: NPN)
The numbers are up, but will it be enough to shift sentiment?
Within the Naspers / Prosus stable, it feels like they’ve been putting most of their effort into telling the Prosus investment story on the global stage. I’ll therefore start with Prosus when dealing with the results of this duo. As a reminder, Prosus is a subsidiary of Naspers.
In the year ended March 2026, Prosus delivered over $7.3 billion in revenue and $1.1 billion adjusted EBITDA in what they now call Ecosystem (formally called eCommerce). Most importantly, each of the underlying ecosystems is now profitable, which is key to the group’s overall “Tencent plus” strategy. In other words, they want the market to place meaningful value on the group excluding Tencent.
Thanks to this result, core HEPS from continuing operations for the N shares is expected to increase by between 19% and 28%. Taking out the “core” adjustments, HEPS from continuing operations for the N shares is up by between 6.7% and 15.7%.
A critical difference is that core HEPS excludes fair value investment movements within Tencent’s earnings. Tencent has acted as a source of venture capital in the Chinese tech market. Results have been mixed, especially as sentiment towards Chinese assets has been negative recently
Here’s a reminder of how closely correlated Tencent is to Prosus, with a view on the ADRs (American Depository Receipts – i.e. both measured in USD) of both companies over 5 years:
The businesses that are only in Naspers (and not Prosus) are too small to make a significant difference to the group, even though this includes the entire Takealot stable! At Naspers, the core HEPS move is between 20.8% and 27.8%, while non-core is between 8.3% and 15.3%.
Both companies are expected to release results on Monday, 29th June. The market will pay plenty of attention to them.
Ghost Bite: I remain long Prosus as an ex-US tech platforms play.
Results of previous poll:
Nibbles:
- Director dealings:
- To “rebalance their portfolios” (rather than because of a need to cover taxes), the CEO and CFO of Lewis (JSE: LEW) sold shares worth nearly R7.9 million in total.
- An associate of a prescribed officer of Insimbi Industrial (JSE: ISB) bought shares worth R2.6 million. There’s been a lot of movement on that share register recently!
- The company secretary of Mr Price (JSE: MRP) sold shares worth just over R1 million.
- Castleview Property Fund (JSE: CVW) is an extremely tightly-held stock that rarely changes hands. Those who are on the register are smiling though, as the final dividend per share for the year ended March 2026 is 90.2% higher than the prior year! Full results are due on 26 June.
- Sebata Holdings (JSE: SEB) has renewed the cautionary announcement regarding a potential disposal of assets. In any event, the shares are suspended from trading at the moment.
- Stefanutti Stocks (JSE: SSK) announced that Zanele Matlala is retiring as chairman of the board, having served as a director since 2012. Howard Craig will replace her as chairman.
