Cash is king
Eureka takes cover from burning equity market
DURING THE YEAR to August 2007 industrial and engineering company Eureka said it had decided to “meaningfully” reduce its investments in equities because it predicted that “market, political and currency conditions would be extremely high risk and volatile for an extended period of time”. It followed through with that promise and sold off all its listed investments apart from its 22m shares held in Set Point Technology and 9,8m shares in Sabvest Ltd. That filled its coffers with a R104m net profit over the period.
However, that decision also cost Eureka one of its only two major shareholders. The Clariden Bank has sold its 47,3% interest in Eureka back to the Price family, which previously controlled 51% of the company. Clariden Bank’s bailout comes after Eureka reported a measly R16m net profit in the year to February 2008, leaving the Price family the sole real investor and exposing the company to a potential delisting in the near future.
“Eureka is unlikely to make any changes to its conservative holding strategy in the near term,” wrote Eureka chairman Ronnie Price in its results commentary in May 2008. “It expects the uncertain political and economic conditions to remain in place for the forthcoming period and that these will put further pressure on the valuation of investments in general.”
To emphasise its attitude, shortly before publishing its results, Eureka invested R40m of its cash holding in euro and US dollar denominated assets. “At appropriate times consideration will be given to increased investment in hard currency assets (in SA),” wrote Price.
Did the Clariden Bank then decide it couldn’t wait for that “appropriate” time? “We’ve been trying to buy the shares for quite a few years now but they weren’t available,” says Price. “But all of a sudden I got the opportunity to buy and I took it.” Price says he’s never met the owners of the shares, as they were never involved in the company. The Clariden Bank bought the shares from a retired partner of Price’s back in the Nineties. “I’ve never even spoken to them.”
Price bought the 1,1m shares at 9500c each, valuing Eureka at R228m and leaving the Price family with all but less than 30 000 of the 2,4m issued shares he bought in 1983. Surely delisting is only a matter of time? “We’ve never even thought about delisting. We’re just lying fallow and waiting for the right opportunities,” says Price. He believes cash is the best asset in the current market environment. Although it is predominantly a cash shell, Eureka still has some operating engineering companies.
The Lewis family also tightened its grip on fashion retailer Foschini. Non-executive director Mike Lewis bought 1,3m shares at 3478c/share for a total R44,8m. That adds to the shares worth R32m he bought in March to increase the 6,3% Lewis held in Foschini at end-March 2008.
Engineering technology and signalling company Ansys has sought to increase its free float with CE Allan Holloway selling 3m of his shares in the company to an insti-
We’re just lying fallow and waiting for the right opportunities.
tutional investor. Holloway says the company is “one of the big name” fund managers but it asked not to be named. It already owns less than 10% of Ansys’ shares. After chairman Teddy Daka, Stanlib Asset Man-
agement was the next biggest shareholder at end-May with its 8,7% stake held through various funds. So why is Holloway selling? He says the main reason was to get higher free float and strengthen the company’s institutional shareholder base. But he also needed the R4,8m (160c/share) for personal reasons. “I want to buy a bigger house to entertain company guests,” says Holloway. He says with the company’s growth and growing stature he has to receive many visitors, including overseas businesspeople.
Elsewhere, Lereko Investment’s Valli Moosa took delivery of his shares worth R11m in Anglo Platinum housed in the RPM Waterval Empowerment Trust since 2004. Lereko was part of the empowerment consortium that helped facilitate Anglo Platinum’s acquisition of mining rights for the Waterval Section of the Rustenburg Platinum Mines, of which all conditions have now been met.
Hotel operator City Lodge Hotel’s directors were the biggest sellers after the high court sanctioned the company’s BEE deal in which Bulelani Ngcuka’s Vuwa Investments purchased a 15% stake for R485m. The 807 000 shares (worth over R62m) sold by six City Lodge directors represented 15% of their combined shareholding in the company.
R11m richer. Valli Moosa