A knight in PSG armour
Several entities could be spun off in the short to medium term
PSG GROUP, which looks determined to unlock value for shareholders, will be separately listing another offshoot between October and November. This time it’s the turn of Paladin Capital, following hard on the heels of the separate listing of PSG’s agri-investor Zeder late in 2006.
Paladin – described as an investment company with a private equity bias – is indeed an intriguing corporate animal, especially since a number of investments held within its flanks could easily be taken to the bourse in the short to medium term.
Paladin, for the record, refers to a medieval knight – which pitches the new group in the rather demanding role of “champion of a cause”. Hopefully this means some oppor- tunistic jousting rather than having to slay dragons…
An official brief notes that Paladin “has no sector-specific focus and invests in cash generating (unlisted) companies with strong, incentivised management that have a passion to yield superior returns for shareholders”. Paladin hopes to have “significant influence” over these investments.
The group’s interests – which are collectively valued at around R460m and generate R23m in after-tax profits – are: • a 54% stake in Algoa Insurance Company, which specialises in sick-leave management; a 49% stake in Thembeka (formerly Arch Equity Investment Holdings), a black-owned and -controlled investment company now headed by entrepreneur KK Kombi; • 36% of Axon Exchange, which operates
in a joint venture with Société Générale; • 52% of CIC Holdings Limited, which owns a group of businesses that operate within the Fast Moving Consumer Goods Industry in southern Africa; • 46% of PE-based Iquad Group, which consists of a number of specialist businesses – investment incentives, treasury risk management and audit services; • 60% of PSG Capital – Corporate
Finance; • 39% of Precrete-Nozala, which produces
and distributes premixed concrete.
• 30% of PSG Capital Quantitative; • 75% of PSG Properties.
After sister medium Fin24 broke the story earlier this month about Paladin Capital, quite a few readers enquired whether Paladin Capital was really just PSG revisiting PSG Investment Bank (PSGIB), the investment banking and private equity company that was acquired by Absa Corporate and Merchant Bank about five years ago.
Paladin CEO Pierre Malan says comparisons with defunct PSGIB are off the mark. “We’re not an investment bank. We are not interested in opportunistic plays…it’s about long-term sustainable growth. We want to generate annuity income for PSG.”
PSG holds 97,5% of Paladin, with management holding the remaining 2,5%. Malan reckons PSG will dilute its stake to around 51% at Paladin’s listing later this year when the group hopes to attract another R250m to R500m in new capital.
Malan says Paladin intends building its portfolio of investments to R1bn by February next year, which certainly will support the group’s aspirations to be a player in larger private equity consortiums.
Some market watchers have questioned the rationale for yet another separate listing of a PSG offshoot, asking whether investors would not still find the listed holding company the best point of entry to participate in ventures such as Paladin, Zeder and even Capitec Bank. Separately listed BEE venture Arch Equity (now Thembeka) was delisted after a short and successful run on the JSE’s AltX board.
Paladin’s selling point is that it does offer strong sustainable cash flows from its underlying investments. If things go to plan – and market sentiment holds up – Paladin could realistically outperform PSG.
Paladin could realistically outperform PSG. Pierre Malan (left) and Jannie Mouton, PSG executive chairman