Tough climate weighs on Howden’s delisting
The delisting pitch price of R44 per share to industrial services company Howden Africa’s minority shareholders is a little shy of the optimistic expectations of about R50-R55 per share.
Considering Howden’s superb profit track record and cash pile of R1.3bn (equivalent to R20 per share), the offer might be construed by impartial observers as opportunistic rather than fair.
But in the prevailing dire economic circumstances and considering Howden’s recent downbeat trading statement, the offer will probably find some support. No doubt Howden’s refusal to pay dividends since 2013 despite the growing cash pile has also probably eroded the enthusiasm of a good number of smaller shareholders.
For the record, the offer constitutes a 22.63% premium to Howden’s 30-day volume weighted average price (VWAP) of R35.88 a share which was taken up to September 25 when the firm went under cautionary.
The offer also amounts to a premium of more than 25% to Howden’s share price on September 25, and a similar premium to the 30-day VWAP up until October 23.
The bottom line is that Howden’s parent company, Colfax, is buying one of SA’s most reliable industrial assets at a very reasonable price.
Over the years, the business generated superb cash flows and the well-regarded management team ran a tight ship.
In the days ahead, there will undoubtedly be some kicking and screaming from asset managers who, due to mandates, mostly cannot remain on board an unlisted vehicle.
That’s justifiable because one way of looking at the delisting proposals is that shareholders are now seeing the proceeds of years of sacrificed dividends being mustered to execute a buyout of minorities. And that’s always going to burn.
The Public Investment Corporation (PIC) wants clothing retailer Truworths to include transformation as a nonfinancial indicator in its remuneration policy.
The PIC, Africa’s largest fund manager with R2-trillion under management, recently increased its holding in Truworths to 16.32%.
This makes it the retailer’s single largest shareholder and puts it at the top of a list dominated by leading international fund managers such as Standard Life Aberdeen, BlackRock and The Vanguard Group.
The PIC voted against the group’s remuneration policy at Wednesday’s annual general meeting, pushing the dissenting vote to 24.996%. This is just a few thousand shares short of the 25% that triggers an obligation for the board to engage with the dissenting shareholders.
Despite escaping the 25% obligation, the board has engaged with the PIC on the matter, appealing to it to reconsider its vote.
However, the PIC first wants to see the inclusion of transformation targets in the remuneration policy.
Meanwhile, the trading update released during the AGM provides yet more evidence of the challenging conditions facing the retail sector.
Sales for the first 16 weeks of the financial year rose 4.5% to R5.3bn, helped by the rand contribution from the UK-based Office chain of shoe stores.
While the share price, currently at R80.11, is unlikely to get back to its 12-month high of R114, investors can no doubt take comfort from the generous dividend yield.