Capital Appreciation eyes three companies

Private placement raises R1bn ahead of JSE debut

SPECIAL purpose acquisition company (Spac) Capital Appreciation identified three potential deals ahead of its debut in the specialty finance section of the JSE main board on Friday.

Motty Sacks, non-executive chairman of the Spac, the sole purpose of which is to hold cash and acquire companies, said all the potential transactions were within the services sector.

“Each of these (companies) is in itself capable of listing on the main board, all have a good track record, good profits and talented management,” he said.

Capital Appreciation raised R1bn from the private placement of its shares, double the minimum R500m it intended to raise. Mr Sacks said the company would not necessarily spend all of the cash on the three deals identified.

“We can pay a purchase price partly in shares, cash and in raising debt,” he said. “Foreign private equity acquirers often leverage capital by five to seven times. In SA a more conservative ratio would be no more than two times the equity, and we would seek to follow that formula.”

He would not confirm how soon Capital Appreciation would finalise one of the three deals. “You can start nagging me from Monday morning,” he said.

Uncertainty over the deal’s time may affect how long the Public Investment Corporation (PIC) stays invested in the firm.

The PIC, which manages assets on behalf of public servants, pledged to invest R250m in the private placement. PIC deputy chairman Roshan Morar said it was happy with the investment. “It’s a short-term investment for us because of the nature of the investment. They hold cash for 24 months.”

This cash is returned to investors with interest if no acquisitions are made. The PIC would stay invested if the Spac bought companies within that time, said Mr Morar.

Investors in the private placement just held on to their capital when trade started on Friday, watching for signs that the share would go below the R1 per share they piled in at.

A representative of a highprofile investment company, who asked not to be named, said he would have been surprised if the price had come in lower than R1. “All that money is still there. It’s still worthwhile.”

Mr Sacks said the listing price of R1 per share was selected to appeal to a broader market.

“It will be a bit unreasonable to expect a Spac with only cash should trade at more than R1, considering that we do not have any operating assets,” he said.

Earlier, the share inched up to R1.15, which Mr Sacks said showed confidence in management’s track record. The share ended at R1.08, for a market capitalisation of R675m.

Its board includes Mr Sacks, a former Netcare chairman; Mr Morar; PIC CEO Daniel Matjila; SizweNtsalubaGobodo CEO Victor Sekese; and former SABMiller chairman Meyer Kahn.

Each firm is capable of main board listing