A speculative play
THE RECENT RESULTS showed revenue slightly higher, while gross profits slipped about a quarter and headline earnings got slammed as the new owner wrote down almost R300m of asset values through impairments.
The new owner is Afrimat, which bought out a number of shareholders at 35c to acquire 50.4% of the business, and it is this fact that interests me. Afrimat is a smart player and wouldn’t have bought if it didn’t have a strong sense that it could make money here, but how does Afrimat extract profits from Infrasors?
Afrimat can make an offer to minorities for the remaining shares it does not hold and that would likely be at a minimum 20% premium to the share price when the offer is made. It could offer cash or Afrimat shares, with cash costing around R60m at the current Infrasors share price. Alternatively, Afrimat could extract profits via dividend payments from Infrasors. Either is positive for the Infrasors shareholders, but as this may take some time to play out, this is a speculative buy.