Not a pile of doggy doo
Gem of an investment
IT’S NOT A PLEASANT WAY to come back after a break, but sometimes you just have to bite the bullet and eat humble pie. When I last wrote about Afgem in September, I may have created the impression I thought the company was a pile of doggy doo and of absolutely no value.
Alas, I couldn’t have been more wrong. While it’s true Afgem proposes to wind itself up, it will be repaying capital to the tune of a handsome 2,65c/share. That’s a total of R6,8m, against the R33,5m market cap before the share was suspended in March 2007. Before its listing in 2001, shares were issued at 400c and I can only marvel at how the managers and controlling shareholders have striven to preserve the wealth of all shareholders.
Meanwhile, what of the unsuitable assets taken out of Afgem and benevolently transferred to London’s AIM market – the equivalent of SA’s AltX – through TanzaniteOne? As you may remember, when I last wrote Pallinghurst Resources’ Gemfields associate – whose CE is Pallinghurst boss Brian Gilbertson’s son, Sean – was considering making an offer at 45p/share, which valued TanzaniteOne at the equivalent of around R500m.
TanzaniteOne has just come up with a novel defence: it’s issued its directors with unlisted but voting B shares that represent 50,2% of the enlarged capital, making the board an impregnable oligarchy. While the shares may lapse after six months, TanzaniteOne says that will give it time to devise a more permanent protective shield.
Though that manoeuvre wouldn’t be acceptable in Johannesburg, TanzaniteOne justifies it as necessary to protect shareholders from Gemfields’ latest first-come, first- served offer for 57% of the equity at a slightly lower 42,75p, which could have transferred control of the company without giving all shareholders the chance to sell.
There’s in effect now been a change of control without giving any shareholders the chance to sell, which is clearly much fairer. It’s heart-warming that the owners of TanzaniteOne are showing the same commitment to their minorities as they did at Afgem.
Somewhat snidely, they point out Gemfields’ share price has fallen by a third since it first announced its intention to bid two months ago. Conversely, TanzaniteOne’s price has almost doubled from the August low of 25,5p/share, though it’s moot whether that would have happened without the underpin of the Gemfields offer.
The directors have also “removed” from the board Mark Summers, a non-exec since he resigned as chief financial officer in June 2007. Is he suspected of supping with the enemy?