In­vestors hop­ing to catch a buy­out bonus will need pa­tience, a ca­pac­ity to crunch num­bers and the for­ti­tude to ig­nore dire mar­ket pro­nounce­ments

Financial Mail - Investors Monthly - - Contents - Cover: THINKSTOCK Irma Stern’s Arab in Black, cour­tesy of BON­HAMS

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


Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.