Copelyn touch to Tsogo deal
BY Friday we’ll know how successful Tsogo Sun has been on its roadshow to drum up support from local and international investors for the purchase of the 300 million Tsogo shares being sold by SABMiller.
The fascinating part of the deal is the proposed repurchase by Tsogo of at least 130 million shares from SABMiller at a maximum price of R21.50 a Tsogo share.
The R21.50 represents an 18% discount on the price at which Tsogo was trading ahead of last week’s announcement.
The fact that the price has remained at that level since the bullish restructuring announcement reflects the share’s current poor level of liquidity.
If the institutional investors are enthusiastic about the outlook for Tsogo and are comforted by the likelihood of increased tradability in the share they might be prepared to consider a higher placing price.
This will be good for SABMiller and great for Tsogo, which has locked in the R21.50 and so will get an even larger discount. But if there is some dramatic, unexpected development within the next few days and investors suddenly lose their appetite for leisure stocks, SABMiller might struggle to get a placing price of even R20.
An 18% discount on this would reduce the per share repurchase price to just over R16 and enable Tsogo to repurchase 170 million shares with its R2.8-billion kitty.
Of course, if something that dramatic happened SABMiller might not want to continue the exercise — or Tsogo might not want to spend so much money repurchasing its own shares.
It is a remarkably smart deal and, given that HCI will be the biggest single beneficiary, it’s hardly surprising that it has Johnny Copelyn’s fingerprints all over it.
Sasol’s possible fine
The Competition Commission was obviously not very impressed by Sasol’s decision to appeal against the Competition Tribunal’s recent propylene ruling.
On Friday, the commission launched a cross-appeal which, in addition to addressing technical legal points raised in Sasol’s appeal, called for the Competition Appeal Court to hike the fine to R2.8-billion from the R563-million recommended by the tribunal.
In Europe, also on Friday, the European General Court cut the à318.2- billion fine imposed in 2008 by the EU Commission on Sasol for its involvement in the European paraffin wax cartel.
The fine was reduced by à168.22- million (R2.4-billion) after Sasol’s appeal to the general court. That would be almost enough to cover the additional R2.2-billion being sought by our own commission.
African Bank
African Bank (Abil) seems to be drifting into a sort of twilight zone where trading in the share becomes hugely speculative and can be set off by any sort of rumour or report.
On Monday, the share surged after the company issued a Sens announcement telling shareholders it had “entered into negotiations regarding the possible disposal of Ellerine Holdings”. What was new in this?
Had none of those who bought or sold on this announcement heard Abil CEO Leon Kirkinis tell analysts in early May that he was talking to a number of parties interested in buying Ellerines?
Perhaps they didn’t believe him, or perhaps they reckon that once it’s in a Sens announcement it is closer to actually happening?
Given the condition of Ellerines and the condition of the market in which it is operating, it is hard to imagine Abil will receive much, if anything, for this business. The major advantage of a disposal would be to enable Abil management to focus on their own problems.
By the end of the week the Abil share price was up 10%. This may have had more to do with speculation about a deal with Old Mutual than the possible disposal of Ellerines.
Gold Fields in Oz
For Gold Fields it does seem to be a case of “you can run but you can’t hide”.
In what was seen as a bid to reduce its exposure to “African risks” such as battles over land claims, Gold Fields unbundled its three South African mines last year into Sibanye, and bought mines in Australia.
Not only is Sibanye doing remarkably well under Neal Froneman’s inspired leadership, but this week came news that an Australian court had found in favour of a group of indigenous people and declared the award of rights over some of the Australian mines invalid.
There is no immediate threat to production at the mines, and Gold Fields is expected to appeal. Shareholders took some comfort from news that the group was on track to meet fullyear output targets.