Grindrod Shipping to consider equity raise
Post unbundling and listing
GRINDROD Shipping, which JSE-listed Grindrod proposes to unbundle from the group and separately list on the US Nasdaq Stock Exchange, with a secondary inward listing on the JSE, will consider an equity raise after its listing.
Martyn Wade, an executive director of Grindrod who will become chief executive of Grindrod Shipping Holdings (Grin), the independent, newly incorporated, Singapore-registered company set to be listed, said yesterday that this was one of the attractions of the unbundling.
Wade said they believed there “will be the right (acquisition) opportunity out there”.
Mike Hankinson, the executive chairperson of Grindrod, added that they were seeking approval from shareholders to raise 45 percent equity in the business.
“We see this as a growth strategy in shipping. We hope to move the market valuation of that business from about $300 million (R3.5 billion) to $500m in the not-too-distant future. That is our internal target,” he said.
Grindrod reported on Friday that it was proposed that the shipping business, which narrowed its headline loss to R202.6m 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) for $320.68m.
The purchase consideration would 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 is still subject to a number of conditions precedent, but was expected to be implemented by about June 18.
Andrew Waller, the group financial director of Grindrod, said Grindrod would not own any shares in Grin, which would have the same shareholders as Grindrod.
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.
They include Remgro, which owns 22.7 percent of Grindrod, and the Grindrod family, who have a 10.09 percent shareholding in the group.
Hankinson stressed that Grindrod was not exiting South Africa, but creating an opportunity for the market to separately value the shipping business.
Waller said the problem they had for the past three years was that the shipping business had a balance sheet of R20 a share, but the group share price was at R11 a share, which meant there was something wrong.
“We could easily have sold it (shipping) to someone, but we don’t think selling shipping for $320m is a very clever idea. We would rather our shareholders hold that share,” he said.
Wade said the proposed unbundling and separate listing of the shipping business was exciting and the business already had 58 people in Singapore, and the support of the Singapore government.
Shares in Grindrod rose 5.18 percent yesterday to close at R13.39.