Mar­ket is ready for an ac­tivist in­vest­ment fund

Financial Mail - Investors Monthly - - Editor’s Note - MARC HASENFUSS email Marc on hasen­fussm@times­me­

THE EMER­GENCE OF VALUE Cap­i­tal Part­ners (VCP) as an in­flu­en­tial share­holder at ser­vices con­glom­er­ate Ad­corp heart­ens me greatly. Share­holder ac­tivism has largely been the do­main of tire­less in­di­vid­u­als such as Theo Botha, who too of­ten can’t back up valid share­holder con­cerns with vot­ing mus­cle. Good­ness knows, if Botha had had in­flu­ence, sad sagas such as Sage might have turned out dif­fer­ently.

Ad­corp, which was once rated as a top sec­ond-line share, has been in a tough space for a while, and share­hold­ers will surely recog­nise that the in­ter­ven­tion by VCP was prob­a­bly not a mo­ment too soon.

It’s not un­com­mon for share­hold­ers to sit on their hands for far too long, re­main­ing hope­ful that an op­er­a­tional or strate­gic tan­gle will even­tu­ally be re­solved sans cor­po­rate ruc­tions. Dis­tri­bu­tion & Ware­hous­ing Net­work (Dawn) is a re­cent ex­am­ple where early in­ter­ven­tion by ma­jor share­hold­ers might have pre­vented some se­ri­ous value de­struc­tion.

VCP, fea­tur­ing An­thony Ball and Sam Sit­hole, is clearly more de­ter­mined than diplo­matic. It has al­ready made its pres­ence felt at tech­nol­ogy gi­ant Al­tron, and share­hold­ers must be thrilled that since the new di­rec­tional share­hold­ers took charge the share price rose around 25%.

Ad­corp’s share bounced back strongly af­ter VCP’s in­volve­ment was con­firmed. But con­sid­er­ing the value that could be un­locked by re­or­gan­is­ing Ad­corp, I sus­pect there is plenty of up­side to come in the next 18 months. Hope­fully other ac­tivist share­hold­ing firms will come to the fore be­cause of VCP’s emer­gence and the chance for suc­cess­ful en­gage­ments at Al­tron and Ad­corp. Or it may in­spire in­di­vid­ual share­hold­ers to band to­gether to form points of in­flu­ence.

Over the years there have been whis­per­ings about the launch of an ac­tivist in­vest­ing fund in SA. Per­haps RECM & Cal­i­bre, the in­vest­ment firm headed by Piet Viljoen and Jan van Niek­erk, is the clos­est we can get to an ac­tivist fund with in­flu­en­tial po­si­tions in long-time “dogs” such as Dawn, Sen­tula and the Trans Hex Group.

Cer­tainly there is more than enough op­por­tu­nity on the JSE for a ded­i­cated ac­tivist fund to so­licit se­ri­ous mar­ket in­ter­est. Of course, gain­ing in­flu­ence is eas­ier said than done. Still, I won­der whether read­ers would flee from or flock to a port­fo­lio man­aged by an en­er­getic ac­tivist in­vestor not cowed by the dif­fi­cul­ties in un­lock­ing value in ne­glected coun­ters.

Let’s as­sume an in­vest­ment en­tity could form a port­fo­lio con­sist­ing of in­flu­en­tial po­si­tions in (for in­stance) In­ter­waste, Ar­gent In­dus­trial, Sun In­ter­na­tional, Bowler Met­calf, Tren­cor, Hu­lamin, Pallinghurst Re­sources and Value Group. Or is it sim­ply eas­ier to stump up for po­si­tions in (the few) stocks with dis­cernible growth prospects?

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