Make no assumptions about Sovereign deal
It’s an indication of just how acrimonious the battle for Sovereign Foods has been that some market commentators dismissed the announcement by Country Bird Holdings (CBH) that it was walking away as a cunning ploy to stir up support from some or other entity, including Capitalworks.
Few believe they are going to chicken out of the deal. But the past two years have taught us not to make assumptions when it comes to Sovereign.
The next few days are going to be tense for Capitalworks as we wait to see whether or not the bird flu has been contained. There doesn’t appear to be any condition in its R12 per share offer that would allow it to walk away if the bird flu spreads.
As for CBH, it doesn’t have to formally put its cards on the table until just before the shareholders’ meeting on October 9, so it has less than three weeks. That would be a bit tight if it was going to make another offer.
Walking away won’t be too unpleasant an option, given that CBH stands to make a profit of about R90m on its 12-monthlong Sovereign adventure.
Talk is that CBH paid an average of about R8.50 for the 34% holding it built up before it had to abandon its bid.
It has said it doesn’t want to stay on as a significant minority shareholder in an unlisted entity, which isn’t too surprising given the strained relationship it has with the Sovereign board and Capitalworks.
In the short term, the Sovereign shareholders are also a lot better off, thanks to CBH. If Capitalworks can generate the sort of returns it believes are possible, then it will be the longer-term winner.
The big number on the chalkboard for soon-tobe-listed private tertiary education specialist Stadio Holdings is an audacious target of R500m in taxed profits by 2026. That bold forecast is a little different to the 2011 listing of Curro Holdings, the private schools company from which Stadio is being unbundled.
Curro’s targeting was mainly around school openings with longer-term profit forecast numbers (outside initial forecasts) uttered mainly on an unofficial basis.
One suspects a bold longerterm profit forecast means there is considerable confidence in Curro founder Chris van der Merwe — who heads Stadio — to deliver a steep earning curve.
The (very) long-term target in terms of student numbers is 100,000, with a target of 35,000 students in the medium term and 56, 000 students by 2026. If the 100,000 student target is achieved, Stadio could be a business capable of taxed profit in excess of R850m, depending on how many contact students and distance-learning participants are enrolled.
The initial capital raise – including the Brimstone-led broad-based empowerment participation – of R840m will probably be spent by at least the first half of next year.
Some time will be needed for internally generated cash flows to pump through — especially in light of curriculum development and campus expansion — which probably means it’s likely the first set of interim numbers to end-June 2018 might be accompanied by a rights issue.
With the PSG Group as the anchor shareholder and the patient capital of Brimstone also prominent, Stadio won’t battle to muster enthusiasm for capitalraising exercises even if operational progress and acquisitive thrusts are not quite as rapid as what was seen at Curro’s private school operations.