Consol cancels its plan to list on the JSE

GLASSMAKER Consol Holdings yesterday made an aboutturn on its proposed JSE listing, announcing that it would no longer go ahead as a result of what it called “prevailing market environment”.

The company said the board and shareholders decided to can the move as the placing of the private placement of shares was not in its best interests.

“In light of challenging market conditions, the board and shareholders have resolved that the prevailing environment is not conducive to the offer achieving their valuation objectives and that it would not be in the best interests of the company to proceed with the offer at the current time,” the group said.

Last week, Consol published a pre-listing statement saying that it planned to raise R3.04 billion through an accelerated bookbuild for its listing next Friday.

The group said the initial public (IPO) price offering for its shares would be between R1.50 and R6.50, with an expected market capitalisation of between R8 billion and R9.8bn. Yesterday, Consol said it would not comment beyond the statement.

It thanked potential investors for their engagement and interest throughout the process and said it remained focused on delivering upon its growth strategies in South Africa and the rest of Africa, including the commissioning of its new facility in Ethiopia later this year.

Cobus Cilliers, an investment analyst at 36ONE Asset Management, said the glassmaker’s U-turn on the listing could have been caused by its inability to achieve the expected minimum valuation.

Cilliers said Consol could have experienced little demand for its shares from investors “for the company’s shares at the lower end of the range, which for Consol was about an R8bn equity valuation.”

Highlighted

Cilliers said that the pre-listing statement highlighted some specific risks which might have made a few investors become nervous.

“Two specific risks were the customers concentration, 78 percent of the total volume came from five customers,” he said, “as well as having an unsigned written contract in place with AB InBev, its largest customer.”

Cilliers said the risks were more pronounced on the pre-listing statement.

Mergence Investment Managers’ portfolio manager Peter Takaendesa said it was not uncommon for companies to withdraw a planned listing.

Takaendesa said the generally weaker current market sentiment has resulted in potential investors offering a lower price for the IPO shares, compared to what the existing private equity shareholders expected.

“A few other companies have also withdrawn their listing offers in the past, due to reasons that range from weaker market pricing to receiving better offers from other private equity investors,” Takaendesa said.

“Consol’s business model is attractive, with very strong market positions in the glass manufacturing markets of a number of leading African economies as well as a very capable management team,” he added.

“They will probably come back to the market again over the mid-term, when conditions improve, as they require capital to fund their growth strategy.”