Shareholders back Dawn’s exit
Distribution And Warehousing Network (Dawn) has written undertakings from five shareholders holding 72.5% of the company’s total shares that they will vote in favour of the sale of its 49% interest in Grohe Dawn Watertech (GDW) to Japan’s Lixil building and materials group.
The names of the shareholders have not been disclosed and a meeting date for general shareholders to implement the deal is not yet known. Lixil will buy the remaining 49% of ordinary shares in GDW held by Dawn for about R324.5m.
“It is therefore anticipated that the resolutions necessary to implement the transaction will be passed at the general meeting,” Dawn said on Monday.
Lixil already holds a 51% controlling stake in GDW, a maker of sanitaryware, including the Cobra taps and Vaal brands. GDW contributed about 10% of Dawn’s annual revenues. These were R4.3bn to March 2017 and R5bn in the year to March 2016.
Under the terms of the share purchase agreement, Dawn will use the proceeds to pay down group debt of R200m and to settle capital gains tax arising from the sale.
Dawn’s share price shot up 20% after the announcement on September 14, before closing 11% firmer on the day at R1.06. It has continued rising and was at R1.14 in late Monday trade.
Anthony Clark, an analyst at Vunani Securities, said he could foresee the stock going much higher. Dawn’s recovery plan, as detailed by recently appointed CEO Edwin Hewitt, was highly credible, he said.
In its annual results to March 2016, Dawn posted a net loss of R758m. It then posted an attributable loss of R637m in the year to March 2017. In April 2017, the company raised R350m in a rights offer.
The group said the focus in financial 2017 was on closing and consolidating businesses to return to profitability in a “deteriorating” domestic economy. Staff numbers were cut by 643 from a total 3,200 in the year.
Clark said challenges were being addressed. “Debt will be expunged and, importantly, the balance sheet is now clean, with cash to grow the business.”