Investors hoping to catch a buyout bonus will need patience, a capacity to crunch numbers and the fortitude to ignore dire market pronouncements
It might not quite be “open season” for buyouts on the JSE, but there are signs that predators and opportunists are muscling in as shareholders wince at the prospect of a possibly prolonged economic battering.
Momentum Asset Management portfolio manager Shawn Stockigt points out that on the whole, corporate buyouts on the JSE are usually spurred by companies with high earnings multiples using their scrip to secure value and growth by buying companies trading on lower earnings multiples.
This would be evidenced in perhaps the most talked about acquisition attempt this year — the bid by high-flying private education business Curro (trading on a trailing earnings multiple of nearly 200) attempting to acquire its more modestly rated rival Advtech (25 times).
But Stockigt argues that the current trend towards buyouts is probably driven more by the abundance of selective opportunities in companies largely being overlooked by the market. “A lot of companies are being ignored on the JSE, where there is a big disconnect between the share price and net asset value or ‘liquidation’ value.”
Opportune Investments CEO Chris Logan, well-known for delving into difficult situations on the JSE, argues that the various challenges in domestic economy (power supply, labour issues and the waning rand) have been increasingly reinforcing notions that it’s not easy to run businesses in SA.
“There might be a sense that
It’s fairly easy to coax minority shareholders into selling out with a buyout offer at decent premium to market value