Ascendis forges a deal with its lenders to settle R7.61bn debt

TRANSACTION Capital was in talks to acquire a controlling stake in usedvehicle dealer WeBuyCars, it said yesterday as it reported its interim results, which saw it resume paying dividends.

The taxi financier was in negotiations to hike its shareholding in WeBuyCars from the current 49.9 percent to 74.9 percent.

Transaction Capital chief executive David Hurwitz said yesterday that consumers were increasingly opting for used vehicles, which was driving growth in this sector as disposable income comes under strain and new vehicle prices continue to rise.

Hurwitz said the growth prospects of the WeBuyCars business would accelerate and support a sustainably higher growth trajectory should the transaction be concluded successfully.

WeBuyCars is currently owned 60 percent by the family trusts of founders Faan and Dirk van der Walt, 31.5 percent by Fledge Capital and 8.5 percent by minority shareholders.

In March last year, the Competition Tribunal prohibited a proposed transaction by MIH eCommerce Holdings, which is owned by Naspers, to acquire control of WeBuyCars.

In September last year, Transaction Capital bought a 49.9 percent stake in WeBuyCars for R1.84 billion after raising R1.2bn of new equity over the past 12 months.

Hurwitz said WeBuyCars’ digital capabilities and credible e-commerce platform would support even higher growth in the medium term.

“In addition, WeBuyCars continues to expand its geographic footprint and plans to develop additional vehicle supermarkets and buying pods in select high-demand locations across South Africa to support growth,” Hurwitz said.

In the six months to the end of March, Transaction Capital resumed paying dividends, with declaration of interim dividend of 19 cents per share following a strong recovery in earnings in the 2021 financial year.

The group reported core headline earnings of R437 million in the six months to the end of March, up 56 percent from the prior year. It said this demonstrated a compound annual growth rate of 17 percent over the past seven years. Core headline earnings per share from continuing operations grew at lower rate of 43 percent to 65.5 cents, due to the value and earnings accretive issue of 59.6 million shares in the past 12 months

“This performance was driven by a combination of organic growth from the group’s divisions, SA Taxi and Transaction Capital Risk Services (TCRS), and acquisitive growth from the WeBuyCars investment,” it said.

Hurwitz said: “Our business models have gained in relevance in this Covid-19 environment. At SA Taxi, minibus taxi remains the largest and most vital service in the public transport network, while other modes of public transport have floundered. At TCRS, Covid-19 has increased indebtedness and impaired consumers’ ability to service debt, creating larger NPL (non-performing loan) portfolios for TCRS to manage or acquire. And, at WeBuyCars, as consumers’ disposable income comes under strain and new vehicle prices continue to rise, consumers are increasingly opting for used vehicles driving growth in this sector.”

Looking ahead, he said headline earnings per share for the full year should exceed 2019 levels, in line with pre-pandemic growth rates.

“Over the medium term, we are confident the group will maintain a sustainable trajectory of superior high-quality earnings and dividend growth,” Hurwitz said.

Transaction Capital shares closed 0.29 percent higher at R34.10 on the JSE yesterday.

ASCENDIS Health yesterday reached an agreement with its lenders for the restructuring and recapitalisation agreement with its creditors Blantyre Capital and L1 Health for the settlement of its outstanding debt of €447 million (R7.61 billion).

However, the group said the proposed transaction required 75 percent of shareholder approval, adding that if it did not receive the required shareholder support, the senior lenders would be able to enforce their rights and Ascendis Health would be placed in business rescue.

The agreement comes after Blantyre Capital and L1 Health increased their exposure to the company’s debt to more than 75 percent of the aggregate exposure of the company’s consortium of external lenders in February.

The South African-based global health and care company was plunged into huge debt when it acquired Cyprus-based Remedica for €260m and Europe’s leading sports nutrition company, Scitec, for €170m in 2016, in a move that was expected to lift the group’s market capitalisation to R11bn.

But the acquisitions failed to yield positive results. Instead the company faced mounting debt, weak earnings growth in the past few years and a market capitalisation of about R410m as of yesterday. Chief executive Mark Sardi said yesterday during the webcast presentation that the group found itself in this position partly due to these acquisitions.

“The acquisitions made in 2016 and 2017 were financed mostly by obtaining debt, and some people believe the company paid a lot of money to land those acquisitions, and the debt has continued to roll over the past few years, which has been problematic for the business,” Sardi said. The group said under the terms of the agreement, lenders would exchange their debt interests for Ascendis Health’s European subsidiaries, Remedica, Sun Wave Pharma and Ascendis’ 49 percent shareholding in Farmalider.

The lenders would also receive the net proceeds from the disposals of Ascendis Health’s South African subsidiaries, Animal Health, Biosciences and Respiratory Care Africa (RCA), all of which were at an advanced stage of sale negotiations. Ascendis Health would retain its divisions in South Africa in Medical Devices, excluding RCA, Consumer Brands and Pharma.

Sardi said the agreement with the lenders was the best outcome for all stakeholders, given the company’s unsustainable debt levels, the cost and terms of the debt and the significant execution risk of the original divestment programme.

“The agreement provides an opportunity to protect the value of the company’s South African assets, as well as the interests of all stakeholders, including shareholders, creditors, suppliers, customers and employees,” Sardi said.

Ascendis Health shares closed 9.09 percent higher at R0.84 on the JSE yesterday.