Wiese clout emboldens Pallinghurst disputers
The iron fist of Christo Wiese may be helping to push the decision by certain shareholders in diversified miner Pallinghurst Resources to start publicly expressing their displeasure with management after a long period of underperformance of their shares.
Wiese, one of the country’s richest people, can afford to take a long view.
His Shoprite shares recently touched a record high of R214, though some of his other interests are struggling in a weak economic environment.
For example, the share price of Brait, in which Wiese has a 35% interest, has plunged to about R61 from more than R170 at the beginning of 2016 because of a substantial fall in the value of its New Look chain in the UK.
Tradehold has slipped from R35 a year ago to just less than R18 now, while diversified engineering business Invicta Holdings is down from R75 in December to just less than R55 today. Stellar Capital has more than halved since early 2016, while Steinhoff has slid from about R97 to R69.
But shares in Pallinghurst, in which the Wiese family holds 19.9%, have pretty much failed to live up to expectations since it was listed in 2008 at R10 and briefly surged to R12.
They are now at 293c, representing a considerable discount to its last published net asset vale of 642c a share. For this, say shareholders, management is largely to blame.
Long4Life – the investment company spearheaded by deal-making doyen Brian Joffe – appears to have opportunities aplenty.
The company came to the JSE while talks were under way with health and beauty specialist Sorbet and last week, pitched a nonbinding offer to acquire sports and outdoor-wares retailer Holdsport.
This week, Long4Life issued another cautionary about a potential deal.
The speculation about a possible target has been wideranging (even outrageous) – which is perhaps understandable because crimping consumer spending has lowered price expectations markedly in the past 12 months.
Tackling Holdsport could be a key deal for Long4Life in terms of gaining transactional traction.
The investment company which raised R2bn when it listed earlier in 2017 – wants to acquire 100% of Holdsport through the issue of new Long4Life shares.
The proposed exchange ratio is 10.44 Long4Life shares for every one Holdsport share.
Holdsport, which has a market value of R2.6bn, is slightly larger than cash-flush Long4Life, which has a market capitalisation of about R2.5bn.
Holdsport’s share price has firmed since the Long4Life announcement, but the firm certainly does not trade at an overly rich forward earnings multiple. Long4Life, on the other hand, trades at a fair premium to its cash holdings.
Some shareholders might resist swapping Holdsport paper – which carries an attractive dividend coupon — for “expensive” Long4Life scrip.
Naturally, the deal-making attributes of Joffe — and indeed those of fellow executive Kevin Hedderwick (formerly of Famous Brands) — do justify some form of premium.
But will it be enough to sway longtime Holdsport shareholders that Long4Life’s involvement can add a dash of speed to earnings growth?