New listings in SA expected to surge

GOLDMAN Sachs, which was the top underwriter of initial public offerings (IPOs) last year, expects new listings in South Africa to jump for the first time in three years as private equity owners sell investments.

“There could be a new wave of listings because of private equity portfolio exits,” Colin Coleman, the head of Goldman Sachs for sub-Saharan Africa, said last week.

Twelve companies went public on the JSE last year, the same as in 2012 and down from 16 in 2011, JSE figures show.

Coleman declined to say which companies might go public this year, other than Alexander Forbes, the retirement fund administrator that has already announced plans for an IPO in the second half. He also declined to comment on a potential listing for Edcon Holdings.

Analysts including Chris Gilmour at Absa Asset Management Private Clients reckon that Edcon, the retailer that was acquired in 2007 by Bain Capital Partners, may consider a listing.

Alexander Forbes, which was bought by private equity investors, including Actis and Ethos Private Equity, for R8.2 billion in 2007, has hired Deutsche Bank and Rand Merchant Bank to advise on an IPO.

Emerging market initial share sales would gain speed this year, with economic conditions “steadying” and the reopening of mainland China exchanges, Ernst & Young said in a report last month. That would result in at least 50 IPOs in the first quarter, it said, with technology, property and financial companies likely to dominate.

Aside from IPOs, “opportunities for investment banks include refinancing, risk management, the restructuring of asset pools and balance sheets”, Coleman said.

Mergers and acquisitions, which declined as South Africa’s growth fell to the slowest pace in four years in the third quarter of last year, might also be on the agenda.

“There will be mergers and acquisitions in South Africa, I’m just not relying on it,” Coleman said, adding that Johannesburg would remain the entry point for investment elsewhere on the continent.

“One of the key themes remains how to buy into Africa – and South Africa is the platform.”

Barclays and Standard Chartered are among the banks that have moved staff to Johannesburg in a bid to tap economic growth rates in Africa, which are outpacing those of developed nations.

While cross-border transactions might slow down in South Africa before this year’s general election, Coleman said, there would be domestic deals and the rest of continent would remain active.

Elections are due to take place by July. They will test the support for the ANC and its ability to implement the National Development Plan, which has been welcomed by investors but rejected by unions. The plan spells out the investment needed to boost growth to 5.4 percent by 2020, from the government’s forecast of 2.1 percent for last year, and to halve the 25 percent official unemployment rate.

“The biggest issue for the year is the team that gets put in place post the election,” Coleman said. “We need to see the depth and quality of the administration – not just in the financial portfolios, but also mining, public works, education.” – Bloomberg