Trio of firms seek to abandon listing ship

With the sorry state of the JSE — especially desultory ratings tagged to so-called SA Inc stocks — no-one should be surprised that several delistings schemes have been mooted in recent weeks.

Three small caps — industrial services business Howden Africa, logistics specialist Cargo Carriers and direct retailer Verimark — have recently indicated a willingness to buy out minority shareholders and shuffle off the bourse.

There is a common thread running through the three counters. All trade on dismissive earnings multiples, the shares are illiquid and the share register is dominated by a single dominant shareholder. What’s more, none of these companies would need, for the foreseeable future, to use the JSE as a platform to raise fresh capital.

Of course, the critical issue for minority shareholders is the buyout price that underpins the delisting scheme.

In these tough times, a majority shareholder has nothing to lose (aside from a reputational dent) by pitching a cheeky offer to jittery shareholders.

Cargo, refreshingly, has pitched what appears to be a generous R21-a-share offer representing a whopping 81% premium on the R10 share price in late January, before the first cautionary related to the delisting effort was issued.

The offer also represents a nearly 40% premium on Cargo’s share price in mid-October, before details of the delisting were disclosed.

Verimark and Howden have not pegged delisting prices yet.

Verimark, which was unsuccessful with an opportunistic delisting offer in 2009, might now know the value of a more enticing offer.

Howden on Monday issued an earlier than expected trading statement, which detailed some operational strain. This might suggest that any buyout offer to minority shareholders — to be curiously conducted via a share buyback — might be on the stingy side.

Shareholders at the annual general meeting of Hosken Consolidated Investments (HCI) may have been surprised to learn the level of commitment by the empowerment investment giant to the oil and gas exploration sector.

HCI is best known for its sizeable investment in gaming group Tsogo Sun. The group also has listed and unlisted investments that span transport, media, technology, property, mining and the industrial sector.

The company, which still carries a slab of debt at the centre, has been cautious on the investment front, preferring not to make too many investments that breach the R500m mark. So it surprised some when HCI CEO Johnny Copelyn disclosed that R1bn had been invested in Impact Oil and Gas, an African energy exploration vehicle. Copelyn conceded it was a big gamble but was hopeful the first well would be drilled in 12 to 18 months “when the project will be more front of mind”.

While Copelyn might be stressing about the speculative nature of the investment, it is doubtful that HCI would commit a chunk of capital without an inkling that the exploration efforts were promising.

Investors may remember scepticism when HCI embarked on its coal-mining venture eight years ago.

HCI Coal now has profitable critical mass and looks well capable of becoming a consolidator in the sector. The potential impact of HCI’s oil and gas endeavours should perhaps not be underestimated.