Fortress gives more details on the direct logistics portfolio in Europe (JSE: FFB)
I always enjoy presentations like these
Fortress Real Estate hosted a property tour in Poland this week, which means that institutional investors were able to see the properties in the flesh. The rest of us plebs are reliant on the online presentation, which the company has at least made available on the website.
The direct logistics portfolio in Fortress is an important part of the story, with an estimated value of completed buildings of €240 million. Recent like-for-like growth in net operating income is 3.0% and they are developing new buildings on a yield of 7.0% to 7.5%.
For those interested, the presentation focuses on the extent of the development opportunity. They’ve completed 320,409sqm of GLA and there’s a further 178,826sqm available for development across five major business parks, so there is still much growth to be unlocked there.
The Karooooo free float looks set to improve (JSE: KRO)
But the market didn’t like the news of founder Zak Calisto selling a portion of his stake
At some point, founders of companies need to liquidate a portion of their holdings and diversify. In these situations, the important thing is to consider how big the remaining stake is, as this shows the level of commitment to ongoing growth. When it comes to Zak Calisto at Karooooo, there’s no shortage of commitment.
He is selling 1.5 million shares at $50 per share, generating a lovely little payday of $75 million (or R1.35 billion). He deserves every cent, having built this company from nothing into a solid multinational group. The really incredible thing is that he will still own 17.9 million shares after this, so he’s selling less than 8% of his total holding! He will be left with roughly a 58% stake in the company.
You can’t just sell a stake of this size through on-market trades, so there are several banks/advisors who are acting as book-running managers to place the shares with large investors. There’s also the option for Calisto to sell up to an additional 225,000 ordinary shares within 30 days, which will depend on how strong the demand for the stock is.
One of Karooooo’s challenges has been relative lack of liquidity in its stock, so this should improve that situation over time.
This didn’t stop the market from throwing a tantrum though, which is either a buying opportunity or just a correction of a particularly wild recent rally. I’ll let you decide:
Another interesting move on the Quantum Foods shareholder register (JSE: QFH)
The technical definition of concert parties becomes interesting here
In South African Takeover Law, the definition of acting in concert is “any action pursuant to an agreement between or among two or more persons, in terms of which any of them co-operate for the purpose of entering or proposing an affected transaction or offer.”
Now, I’m no attorney, but this article that I found on the CDH website certainly is written by attorneys. It makes reference to acts of co-operation and even the concept of masterminding the acquisition of securities, with a fun reference to “a nod and a wink” as well.
Despite what appears to me to be a very broad definition, there are major shareholders in Quantum Foods who are adamant that they are not acting in concert.
On one side, we have Capitalworks Private Equity and Crown Chickens, a related party. On the other, we have Aristotle Africa. Now, Capitalworks and the related party have entered into agreements that will take them to a stake of 15.53% of total shares in issue. On top of this, they’ve entered into a right of first refusal agreement with Aristotle, in which the parties have granted each other such a right to acquire each other’s shares.
A right of first refusal means that if the owner of the shares wants to sell them, they must be offered to the holder of that right first. It’s not like a call option where you can force the holder to sell. The right of first refusal only does something if a decision is made to sell the shares.
These agreements, if triggered, would take the Capitalworks entities to a holding of more than 50% of shares in issue. This would of course lead to a mandatory offer for the remaining shares if they got to that level.
Now here’s the interesting part: Capitalworks has stated that they do not have an intention to make an offer to shareholders, but they reserve the right to do so in future. They’ve also said that they are not acting in concert with Aristotle and that no other agreements are in place between them.
I have zero doubt whatsoever that proper legal advice was taken here. It would’ve been an interesting legal opinion to read, as my guess is that much of the argument hinges on the parties granting each other a right of first refusal i.e. it’s not obvious which party might end up with the higher stake.
If not to facilitate a pathway to control, the agreements could also be there to prevent another major shareholder arriving out of nowhere and taking either of these parties out.
Here is the danger of speculating on potential corporate actions, with the ill-advised speculative buying in 2024 having backfired spectacularly on punters:
That share price chart is possibly the most exciting thing to have happened in the pretty little town of Wellington in the past year.
Renergen has released the ASP Isotopes circular (JSE: REN)
The structure is a scheme of arrangement with a standby offer
As you know by now from previous announcements, ASP Isotopes (which is coming to the JSE at some point this year), is looking to acquire Renergen. The preference is to do this as a scheme of arrangement, which is a mechanism whereby 75% approval ends up being binding all shareholders to the deal. If they fail to get this level of approval, then a standby offer will be triggered in which shareholders who want to sell can tender their shares to ASP Isotopes.
We’ve seen exactly the same thing play out in Barloworld, where the scheme failed and thus a standby offer was triggered. It’s common practice when the acquirer isn’t completely set on acquiring 100% or nothing.
ASP Isotopes itself is a fascinating company. The CEO was recently on Unlock the Stock (video below for those interested), although absolutely zero mention was made of Renergen (not even a small clue!) as this was before the news of the deal broke. It’s a great opportunity to learn more about ASP Isotopes:
There are a number of reasons given for the deal in the circular. But at the end of the day, ASP Isotopes is sitting with cash and Renergen is in need of funding. The team at ASP also has experience in getting difficult assets to work in South Africa, with the Renergen team having missed enough milestones that it’s been very hard to win the trust of the market. Once you layer on the interesting supply/demand dynamics for helium and isotopes, there’s a loose argument to be made that the assets might belong in the same group. But above all, I think this is just opportunistic dealmaking – and why not?
This is structured as a share-for-share offer, with ASP Isotopes currently listed on the NASDAQ and due to list on the JSE. The relative prices based on 16 May put the offer at a premium of 41.3% to the Renergen 30-day VWAP. The independent board of Renergen has been advised by Forvis Mazars as the independent valuation expert. Based on that report, the board sees the offer as unfair but reasonable to shareholders, which means that it is below the estimated fair value, but above the current traded price. I refer you to my opportunistic dealmaking comment. I must also note that the standby offer isn’t even conditional on a minimum acceptance threshold, so ASP Isotopes is happy to pick up any number of Renergen shares at this price.
Irrevocable undertakings have been provided by holders of 35.86% of shares in Renergen, including executive management. Mazi Asset Management led the way here, with a 13.5% stake in Renergen that I’m sure caused them many sleepless nights.
There are a number of conditions precedent for the deal, including AIRSOL agreeing to extend the maturity date for the convertible debentures to at least 31 March 2026. They also need banking and regulatory approvals, along with the approval for ASP Isotopes to list on the JSE.
The general meeting to vote on the scheme has been scheduled for 10 July.
Southern Palladium locks in A$8 million in fresh equity (JSE: SDL)
And at a solid price, too
Junior mining is all about making sure that the market is willing to support you with capital raises. It requires immense capex to get a mine off the ground (or into it, as the case may be!), funded via a spectrum of options from pure equity through to innovative debt and debt-like structures. Royalty agreements and prepaid offtakes also pop up from time to time.
At Southern Palladium, the latest raise of A$8 million is as simple as it gets. They’ve received commitments from one of the largest current shareholders to the tune of A$4.6 million, with this cornerstone investment helping to get a number of new and smaller institutional investors across the line. Institutions tend to move in packs on something like this, relying on the power of a joint due diligence.
Here’s the really good news: the placement is priced at A$0.50 per share, which means a 10.5% premium to the 10-day VWAP. That’s really impressive, as investors usually want to receive shares at a discount before supporting a raise like this.
The proceeds will be used for the Definitive Feasibility Study (DFS) work at Bengwenyama, along with other key milestone like the publication of the optimised Pre-Feasibility Study (PFS) and receipt of a Mining Right.
In junior mining, it’s all about hitting those milestones and having access to funding along the way.
Nibbles:
- Director dealings:
- Various directors of Hammerson (JSE: HMN) bought shares via a dividend reinvestment plan. The aggregate value of purchases is R800k.
- The CFO of Spear REIT (JSE: SEA) bought shares worth R209k.
- Recently listed Shuka Minerals (JSE: SKA) has received final authorisation from the Competition and Consumer Protection Commission for the proposed acquisition of 100% of Leopard Exploration and Mining in Zambia. The underlying asset is the Kabwe Mine. To pay for the deal, they will issue $3 million worth of new shares (at a premium to the current market price) and will fund the remaining $1.35 million in cash through a new unsecured and non-dilutive facility. Once issued, the shares will represent 29.99% of total shares in issue. The sellers of Leopard will also receive 2,000,000 share warrants. Importantly, there’s no deferred compensation here, so there is clarity up-front regarding the total acquisition price.
- MTN Zakhele Futhi (JSE: MTNZF) closed 42% higher on Thursday based on the news that the board is unwinding the structure. This just shows you how big the liquidity discount is in these B-BBEE entities. The board will soon update investors on exactly how the cash proceeds from the sale of MTN shares will be used to settle debt before being distributed as part of the unwinding of the structure.
- Here’s an unusual and interesting director appointment for you: Clientèle (JSE: CLI) has appointed Ian Kirk as what they refer to as a non-independent director. That feels like a typo and that it should be non-executive director. Kirk is of course the ex-CEO of Sanlam and Santam. He serves on several other boards at the moment.
- We may be spared from further Italtile (JSE: ITE) director dealings announcements this month, as the non-executive director who is selling pledged shares has resigned from the board with immediate effect.
