Grindrod to sell and list its loss-making shipping business on Nasdaq in the US

GRINDROD, the listed integrated logistics service supplier, has decided to sell and separately list its loss-making shipping business on the US Nasdaq Stock Exchange, with a secondary inward listing on the JSE.

The shipping business comprises the international dry-bulk and tanker shipping group of Grindrod, whose origins date back to the formation of a shipping and related business in 1910 by Captain John Edward Grindrod.

Grindrod, as part of a restructuring of the business, has also decided to close its rail assembly business, which in 2016 it had decided to dispose of, and to sell its rail construction business.

It is proposed that the shipping business, which narrowed its headline loss to R202.6 million in the year to December from R569.6m in the previous year as it benefited from rising dry-bulk rates, would be sold to Grindrod Shipping Holdings (Grin), an independent, newly incorporated Singapore registered company, for $320.68m (R3.75 billion).

The purchase consideration will be settled through the issue of non interest bearing Grin compulsory convertible notes of equivalent value to Grindrod, which it would then distribute to ordinary Grindrod shareholders in the ratio of 2.5 Grin notes for every 100 ordinary Grindrod shares held.

These Grin notes will on receipt by ordinary shareholders immediately and automatically convert into Grin ordinary shares of equivalent value, which will be listed on Nasdaq and the JSE.

The proposed transaction, which is still subject to a number of conditions precedent, including the approval of Grindrod shareholders, was expected to be implemented by about June 18 this year.

In favour Ordinary shareholders in Grindrod representing 41.19 percent of the company’s issued ordinary share capital have in writing undertaken to vote in favour of the proposed transaction.

Mike Hankinson, the executive chairperson of Grindrod, said on Friday that the change in the business cycle had impacted positively on the business.

Hankinson said that the shipping business had remained sustainable during a prolonged period of adverse conditions that saw the failure of several of its peers, adding the net asset value of the business was $320m, which was about fair value.

The continuing businesses, comprising Maputo port and terminals, logistics, marine fuels and agricultural logistics, and financial services, posted headline earnings of R570.8m in the year to December, a 173 percent improvement on the R208.8m achieved in the previous year.

Revenue, including joint ventures, rose 14 percent to R21.3bn from R18.7bn.

Headline earnings a share from continuing operations increased by 173 percent to 76.0c from 27.8c.

The headline loss a share from total operations, including the proposed separately listed shipping business, dropped by 22.5 percent to 47.4c from 61.2c.

Hankinson said Grindrod’s businesses were set to benefit in coming years from the foundation that had been laid to optimise value creation and the strategy to unlock value should be largely completed in the second half of this year.

Shares in Grindrod dropped 1.01 percent on the JSE on Friday to close at R12.73.