Ghost Bites (Grindrod Shipping | Sanlam)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Grindrod Shipping shareholders are celebrating (JSE: GSH)

Their ship really has come in, with a potential delisting on the table

With Taylor Maritime Investments holding 83.23% of the shares of Grindrod Shipping in issue, the day was always going to come where Taylor looked to finish the job of delisting the company. In a clever proposed deal structure, this will effectively be achieved with the internal resources of Grindrod Shipping via what is known as a selective capital reduction.

Essentially, the company would buy back the shares not held by Taylor, leaving no other shareholders in place and therefore no reason for the company to remain listed on either the NASDAQ or the JSE.

The price on the table is $14.25 per share and the total deal value is just under $50 million. The price is a 54.8% premium to the 30-day volume-weighted average price (VWAP) on the JSE. As juicy as that sounds, shareholders will of course still need to approve the transaction and an independent financial expert has been appointed to issue a fairness opinion. This will be included in the circular to shareholders.

The share price closed 25% higher at R249.90. This is lower than the offer price because of the risk of deal failure and the time that will be required to implement the deal.

Sanlam invests further in India (JSE: SLM)

This is a lucrative opportunity for the group

At a time when the growth story around China has been under pressure, India has been getting increasing amounts of attention as an interesting emerging market. For a South African financial services group, India seems like a logical expansion opportunity.

Sanlam has already been in India for a while now, holding significant investments in Shriram as part of a partnership going back to 2005. The group has now decided to increase its stake in both Shriram General Insurance and Shriram Life Insurance. This is being partly funded (around 60%) by a disposal of a portion of the direct holding in Shriram Finance.

The effect of these transactions is that Sanlam will increase its stake in Shriram General Insurance from 40.25% to 50.99%, as well as the stake in Shriram Life Insurance from 42.38% to 54.40%. The shareholding in Shriram Finance will dip from 10.19% to 9.54%.

This is a clever approach that requires limited additional capital (only 40% of the purchase price is new capital flowing into India) to take the stakes in two business units to controlling stakes.

The near-term impact on the net result from financial services is expected to be marginally positive for earnings and marginally negative for dividends. This is a long-term play, with India seen as an attractive market that can achieve returns for Sanlam well in excess of the “internal hurdle rate” – the return they need when deploying capital.

Little Bites:

• Director dealings:
  • A non-executive director of Remgro (JSE: REM) purchased shares worth R485k.

• Also at Remgro (JSE: REM), It’s rather interesting to note that Carel Vosloo, who held a lot of senior positions at RMB including co-head of corporate finance and investing banking, has been appointed as an alternate director to Jannie Durand. Vosloo joined Remgro in March 2022. Recent performance at Remgro hasn’t been acceptable, so perhaps this is a step towards trying to address that.

• DRA Global (JSE: DRA) announced that the group CFO has resigned. He has been with the company since December 2021 and in the role of CFO since May 2022, so that’s not a long stint. The company has promoted an internal resource to Acting CFO.

INVEST IN SHARES