A spec­u­la­tive play

Finweek English Edition - - INVESTMENT - SI­MON BROWN

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.

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