Ghost Bites Vol 44 (22)

Corporate finance corner (M&A / capital raises)

• You may recall that Remgro and MSC Mediterranean Shipping Company made a rather surprising offer for Mediclinic at the beginning of June. The board of the hospital group told the billionaire families exactly where to put that offer, possibly with medical assistance if needed. Since then, there have been four more proposals of which three were rejected. The fourth one is far more interesting, valuing Mediclinic at 504 pence per share. This is a 35% premium to the price on the day before the initial offer was made. The latest offer is 8.9% higher than the initial proposal. The independent board has noted that if this becomes a firm offer, they would be willing to recommend it to shareholders. As UK law applies here, there is a colourfully-named “put up or shut up” clause (no, really) that requires Remgro and MSC to either make a firm intention offer by 4th August or walk away. Although there is still no guarantee of a deal here, a 8.6% jump in the share price on Thursday shows you how the market feels. At the current exchange rate, that’s a potential offer of R101.20 per share vs. the closing Mediclinic price of R94.90.

• This Groupe Canal+ / MultiChoice thing just isn’t going away. The French media company has bought even more shares in MultiChoice, taking its stake to over 20%. We would have called that a “significant minority” stake in my investment banking days, which is the level at which things are starting to get serious. We don’t know what the intention is with this MultiChoice investment, but companies don’t build up a 20% holding with no plan in mind. Canal+ is owned by Vivendi, a listed French media giant with a market cap of €10 billion (around 3.5x the size of MultiChoice).

• Bidvest has acquired 100% of BIC Australia, which has nothing to do with those orange pens that most of us held at some point in time in our school careers. For the younger readers, there was a world before iPads believe it or not! BIC Australia is a private company that offers integrated facilities management services. Cleaning services are at the core, with a full range of hygiene, waste and similar services offered. The client base is primarily A-grade offices in New South Wales. The price is based on an enterprise value for BIC Australia of R1.8 billion, which is the value of assets in the business less any excess cash. The actual cash payment would depend on how much debt is in the business vs. equity. Bidvest is paying for this with the proceeds from the bond issuance in October 2021. The management team have signed service agreements and remain committed to the business.

• Alexander Forbes announced in March that Prudential Financial (listed on the New York Stock Exchange) had agreed to acquire 14.83% in the company from Mercer Africa, a subsidiary of Marsh McLennan Companies Incorporated (also listed on the NYSE). The deal has closed and the price was R5.05 per share excluding the dividend declared on 6th June and payable on 11th July. Prudential also intended to make a partial offer to other shareholders if the Mercer deal went ahead, which is now the case. A partial offer takes Prudential to a maximum 33% stake in Alexander Forbes, below the 35% threshold that triggers a mandatory offer. ARC Financial Services holds 41.47% of Alexander Forbes and will not accept the partial offer. A circular will be sent out in due course with the terms of the partial offer.

• Sirius Real Estate has completed the sale of its £16 million BizSpace Camberwell business park in London. The net initial yield is only 2%, which means the selling price was really high. In fact, Sirius achieved a 94% premium to what it paid for the asset in November 2021! Full marks to Sirius here – the company has made a song and dance about its ability to create value through active management of assets and we’ve seen it come through in this sale.

• Life Healthcare has registered a R7 billion Domestic Medium Term Note Programme Memorandum with the JSE. If you’re interested in what a debt raise on the JSE looks like, you’ll find all the documents at this link.

Earnings updates

• Deutsche Konsum REIT is one of those almost pointless listings on the JSE, as the stock practically never trades. Nonetheless, the group gives us insights into the convenience retail property market in Germany. That’s rather niche, I know. The fund has acquired six more properties on an initial acquisition yield of 8.6% with a vacancy rate of 1.6%. In the current financial year, the fund has managed to acquire 21 properties at an average initial yield of 8.5%. The fund also managed to sell five properties on which it made a gain. The total portfolio is 179 properties. As Deutsche Konsum offers such interesting exposure to the German market, it’s a pity that there is no trade on the JSE.

Share buybacks and dividends

• African and Overseas Enterprises as well as Rex Trueform (separately listed but part of the same group) have declared dividends on their 6% cumulative preference shares. I’m not close to the detail on this group but I did notice that the African and Overseas Enterprises preference shares are “participating” preference shares, which means they can achieve a return above the 6% coupon depending on the terms of the shares and what triggers that participation.

Notable shuffling of (expensive) chairs

• There’s another senior change at York Timber, this time with the resignation of the company secretary after a period of 9 years at York.

• Woolworths has appointed Nombulelo Moholi as Lead Independent Director. Ms Moholi has served on the board in a non-executive capacity since July 2014.

• AngloGold Ashanti has appointed Ian Kramer as Interim CFO after the retirement of Christine Ramon. The company is following a “comprehensive international search process” for a permanent CFO. Kramer is an internal appointment and will no doubt be hoping that the international process comes up empty.

• Netcare’s Chair Thevendrie Brewer has resigned as her family have decided to emigrate. I guess load shedding was the last straw. Ms Brewer has been in that role since April 2018 and on the board since 2011. Netcare hasn’t announced a new Chair yet.

Director dealings

• An entity related to the CFO of Famous Brands has bought CFDs on Famous Brands worth over R825k. This is a pretty serious punt at the shares and ties up with what I’m seeing from the property REITs who have commented on how “entertainment” tenants are having a far happier time of things at the moment.

• The recent insider buying at Raubex has been something to behold. The latest purchase is significant – a R700k acquisition of shares by the recently appointed CEO of the group.

• Another company that has seen regular buying by directors is Kaap Agri. The latest purchase is by a non-executive director to the value of R145k.

• Value Capital Partners is still piling into PPC shares, with around R9 million worth of shares acquired in the past three days. We know about this because there are directors on the PPC board appointed by Value Capital Partners as an anchor shareholder. The share price had a huge day, closing over 15% higher. Even with that move, it’s still nearly 40% down this year.

• Telkom directors received shares in the company and appear to have run for the hills, with major disposals by several directors. The announcement doesn’t say that this sale was a portion of the share-based awards in order to cover taxes payable, so I’ll assume that this was an outright sale because they don’t want the shares. At least I have something in common with Telkom directors, because goodness knows I don’t want the shares either.

Unusual things

• I can see that Kibo Energy is one of those companies that will announce every step of its journey in the renewables space, much like Renergen does with its projects. To be fair, investors in these types of businesses tend to hang on every word. In this case, the news is that Kibo has committed to purchase the first two proof of concept CellCube batteries that use fancy technology. Kibo has a strategic framework agreement with CellCube to deploy long-duration energy solutions in Southern Africa.

• With Irongate (the old Investec Australia Property Fund) leaving the market as part of the buyout by Charter Hall, Fairvest B shares have been promoted to the FTSE/JSE Capped Property Index. This means that Fairvest will be bought by any ETFs tracking the index.

• Although it comes through as director dealings, the disposal of R13.8 million worth of shares in Finbond by Protea Asset Management LLC is actually an unbundling of shares to the underlying investors in that fund. Protea is linked to Sean Riskowitz who sits on the Finbond board.

• MiX Telematics has raised a R350 million general credit facility from Investec and an uncommitted general credit facility of $10 million.

INVEST IN SHARES