SPE­CIAL SIT­U­A­TIONS

While the bear prowls the JSE, ready to tear a strip off way­ward in­vestors, there are ways for sharp pun­ters to in­su­late a port­fo­lio against fur­ther down­side risk — and make a nifty lit­tle re­turn in the process

Financial Mail - - COVER STORY - Marc Hasen­fuss

The dour trad­ing con­di­tions on the JSE do, iron­i­cally, of­fer some — al­beit in cer­tain cases short-term — up­side po­ten­tial in the form of spe­cial sit­u­a­tions. This can en­tail an un­lock­ing of value, when new share­hold­ers take con­trol of an un­der­per­form­ing com­pany or en­sure they have in­flu­ence over a com­pany’s strate­gic di­rec­tion. It has oc­curred at ser­vices group Ad­corp and tech­nol­ogy con­glom­er­ate Al­lied Elec­tron­ics Corp (Al­tron).

There is a sim­i­lar ef­fort un­der way at em­pow­er­ment counter Grand Pa­rade In­vest­ments (GPI), where ac­tivist share­hold­ers are hop­ing to close a huge dis­count on the group’s in­trin­sic value.

In the case of Ad­corp and Al­tron, the in­ter­ven­tion of an in­flu­en­tial share­holder has al­ready put some pep in the share prices. At GPI there has been a slight uptick in the share price since the ac­tivist share­hold­ers’ in­ten­tions were de­clared, but there is still some cau­tion, as the process of gain­ing board in­flu­ence will be de­cided only at the end of this month.

In tough trad­ing con­di­tions, as val­u­a­tions are ground down, it also seems rea­son­able to as­sume that cor­po­rate takeovers could be on the in­crease.

While there are a num­ber of dis­tressed com­pa­nies on the JSE, there are also promis­ing ones with de­cent fun­da­men­tals that are tagged with dis­mal mar­ket rat­ings.

Dairy group Clover and Uk-based shop­ping cen­tre-owner Intu were both trad­ing at dis­re­spect­ful rat­ings be­fore be­com­ing sub­ject to takeover bids. Intu’s takeover bid has come at con­sid­er­able pre­mi­ums to re­cent share price av­er­ages.

In­dus­trial coun­ters Torre and How­den Africa are both sub­ject to pro­pos­als to delist by mak­ing an of­fer to mi­nori­ties, though the lat­ter has cu­ri­ously opted to ex­e­cute this ex­er­cise through a share buy­back. At the time of go­ing to press spe­cial­ist re­tailer Ver­i­mark — a com­pany shunned by main­stream in­vestors de­spite bouts of su­perb prof­itabil­ity and a gen­er­ous div­i­dend regime — also in­di­cated that its con­trol­ling share­holder, the Van Straaten Fam­ily Trust, in­tended buy­ing out mi­nori­ties and delist­ing the com­pany.

Min­ing group ex­tract, which only re­cently un­bun­dled from in­dus­trial ser­vices group ENX, has pro­posed a delist­ing too.

There are bound to be more spe­cial sit­u­a­tions un­fold­ing in the months ahead, and in­vestors might do well to spot shares that could be sub­ject to share­holder ac­tivism as

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