Compelling investment options
Specialist industrial companies eyeing the JSE
At the end of last month, South Ocean, a well-established cable maker (and worthy rival to Aberdare and African Cables) listed on the JSE’s main board with a market capitalisation of nearly R900m – making it one of the biggest listings on the JSE in recent years. South Ocean placed 52,5m shares at 700c with consummate ease – suggesting a considerable market appetite for well-established mid-size industrial companies.
It seems South Ocean’s achievement will this week be superseded by road builder Raubex, which – at the time of going to press – was set to list with a market capitalisation of well over R2bn. The group – more than three decades old – was pitching about 56m shares at between 1350c and 1500c per share mainly through a book-building exercise managed by Investec.
Finweek understands (from talking to corporate advisers) there are more than a handful of specialist industrial companies (particularly family-owned entities) that are eyeing the JSE in a bid to woo empowerment partners, raise corporate profiles and bolster balance sheets to ensure business opportunities are not lost due to lack of capacity. THE SIZE AND STATURE of new JSE listings appear to be growing, a development that suggests the prevailing mini-listings boom is not the exclusive ambit of the frothy junior market, the AltX.
While new listings should roll steadily on to the JSE this year (unless prime movers are spooked by the current market jitters), there are also a number of existing listings that look set to or might contemplate unshackling portions of their business with separate listing proposals.
The most signif icant development in this regard – at least in terms of size and stature – could come from the flanks of Richemont and Remgro*.
The two Rupert family-controlled companies struck a revised agreement with British American Tobacco (BAT) to make provision for a secondary listing of the London-listed tobacco giant on the JSE.
The reason the secondary listing provision arose is due to a proposed BAT share buy-back. Remgro and Richemont collectively own just under 30% of BAT, but this stake is likely to rise well past that 30% level as a result of share buy-backs being made by the tobacco group.
Shareholders and the LSE are likely to agree to a proposal that the breaching of the 30% level will not entail Remgro and Richemont (via R&R Holdings) making a compulsory offer to BAT minority shareholders.
The secondary listing then is tantamount to an insurance policy for SA-based shareholders in Remgro and Richemont, enabling them to participate in an unbundling exercise if either company decided to spin off the tobacco interests.
Remgro and Richemont made it clear in a press statement that no such unbundling of the BAT stake was being contemplated. But the very fact that it has been mulled over in the minds of the Remgro and Richemont executives is significant enough…and more than a few shareholders may prefer to see Remgro build its industrial and financial services interests and Richemont its luxury goods business sans the stigma of tobacco.
Others may well embrace locally listed shares in BAT, which – as a conservative, cash-generative company – is renowned as a defensive stock.
Another interesting development – and perhaps one that’s long overdue – is the admission by container management group Trencor that it was keen to separately list its core Californiabased container-leasing arm, Textainer.
Trencor’s Neil Jowell says investigations into value-enhancement initiatives at operational level indicated that it might be appropriate to list 72% owned Textainer on an international stock exchange.
Textainer, which manages the world’s largest lessor-operated container fleet of more than 1,5m units, reported net profit of $54,1m in the year to end-December 2006.
Possibly this would see Trencor (which is simplifying its control structure) considering a secondary listing for Textainer in SA – although the California-based operation already accounts for the bulk of Trencor’s earnings.
Another significant new listing possibility was tucked away in the recently released results of clothing & textile giant Seardel. Directors’ comments disclosed that the strongly performing office equipment and consumer electronics division Seartec was set to clinch a broad-based empowerment deal. Seartec – in interim results to end-December – generated more operating profit than the core textile and clothing businesses despite generating a much smaller turnover.
While Seardel has stressed that operational diversity is integral to the group’s sustained profitability, one cannot help wonder – especially with empowerment partners onboard – whether Seartec (which was listed in the late Nineties) should not be unbundled or partially unbundled for a separate listing?
No doubt Seartec could also raise a fair bit of new capital for expansion and seeking out new opportunities.
Possible secondary listing for Textainer in SA. Neil Jowell