Consol drops capital-raising plan
• Group aimed to list on JSE and sell shares to investors to cut debt burden
Glass packaging firm Consol, which planned to ease its hefty debt burden by raising R3bn in fresh capital, has canned its proposed JSE flotation barely 10 days after publishing a prelisting statement.
On Wednesday, Consol announced that challenging market conditions had scuppered the listing and associated capital raising. It deemed the prevailing environment not conducive to the offer achieving valuation objectives and not in the company’s best interests.
Business Day understands there were misgivings in the investment community around raising capital that would mostly be used to reduce debt.
There was also talk that international investors were demanding in terms of the price the Consol shares were pitched at in the offer. A source noted: “The existing investors were squeezed really hard in terms of price … in the end the private equity investors were not prepared to let go at these prices.”
According to the prelisting statement issued in mid-April, Consol proposed pitching 761million shares to selected investors at a wide price range of 150c per share to 650c per share. A successful placement at the mid-price range would have netted Consol R3bn.
Consol intended using R1.8bn to reduce debt facilities, R635m to redeem preference shares and R241m to repay a portion of shareholder loans.
Consol shareholders include Brait (29.7%), Old Mutual Private Equity (22.8%), Sanlam Private Equity (12%), Sphere (10%), HarbourVest Partners (9.8%) and the Public Investment Corporation (7.5%).
Denker Capital director Ricco Friedrich believed the market was tired of rehashed listings from the past. (Consol was listed up until 2007, when it was delisted after a private equity buyout.) He said the Consol “story” was not exciting with limited growth and a capital intensive business model.
The prelisting statement showed Consol managed operating profit of R668m off turnover of R3.7bn in the halfyear to end December.
But the group posted a pretax loss of R80m after finance expenses of R625m.
Consol’s latest interim results also showed noncurrent shareholders’ loans topping R4.5bn and preference share liabilities of R595m, as well as current borrowings of close to R4.2bn and an overdraft of R388m. At the end of the interim period Consol’s total liabilities of R11.9bn were larger than total assets of R10.8bn and current assets of R3.5bn were overshadowed by current liabilities of R5.7bn.
Consol CEO Mike Arnold was not available for comment. But a spokesman contended that after the envisaged listing proceeds had been used to reduce debt levels a new investor would have been invested in a company that had a relatively low level of debt and a strong balance sheet.
Ron Klipin, a portfolio manager at Cratos Wealth, said the jittery market conditions were not conducive to listing, especially with weak demand still evident in the consumer sector.