Ethos Offer For Consol 'Fairest Of All'
Analysts have described the private-equity offer for Consol ”” the latest for a prime asset listed on the JSE ”” as “the fairest of them all”.
Ethos Private Equity Fund’s offer of R19,24 a share for the glass packaging company represents a 60% premium to the value of the share the day before Consol first issued its cautionary and has blown away investors.
The relentless pursuit of high-value assets by private equity firms in recent months has had investors’ backs up ””they see the public missing out on sharing in the opportunities presented by a robust economy as the takeover targets are delisted from the stock exchange.
The other private equity offers made so far ”” for Alexander Forbes and Shoprite ”” have further incensed investors with the offers below market expectations.
Ethos’s offer, however, was a welcome departure from the stingy offers seen to date, an analyst said. The price also represents a 47,9% premium to the 30-day volume weighted average price a share on the JSE in the month leading up to July 19, when Consol first issued a cautionary. And even as the share price spiked almost 7% after news of the offer reached the market, Ethos’s offer still represented a premium to the current price.
Yesterday’s share price of R18,36 put Consol’s market capitalisation at R5,79bn. Ethos’s offer is worth R6,06bn.
“This is really a great price. The offer is way above the expectation of the market,” said Coronation investment analyst Ndabe Mkhize, adding that expectations were for a price between R16,50 and a high of R18 a share, with fair value put at R16.
An unnamed analyst, however, questioned Consol’s willingness to now put debt on its notoriously ungeared balance sheet.
However, Consol chairman Royden Vice defended that position. Its decision to focus solely on glass meant its only opportunity for expansion lay outside SA. And while the company had been pursuing initiatives in Africa, those were slow in the making. Mkhize also thought that the market had generally misunderstood Consol.
“We’re seeing a lot of international people sniffing around in SA and businesses with good cash flows that are lowly geared will be natural targets. “Maybe this will be a wake-up call for the investment community. We complain vociferously about private equity, but often shares are trading below value and then someone else comes along and recognises the real value,” he said.