Private Equity Raiders Bag R6bn Jse Trophy
Private equity makes Consol offer
PRIVATE equity continues to cut a swathe through the JSE’s prized high-value assets, with glass company Consol succumbing yesterday to a R6bn bid that will see it quit the bourse.
The Consol offer follows a slew of private equity buyers moving in on SA’s listed assets.
Private equity offers have been received recently by Alexander Forbes and Shoprite, while an announcement on the possible buyout of clothing retail giant Edcon is imminent.
The total of the three offers received could see assets worth R27,58bn disappear from the JSE while the expected price tag on Edcon will bring that figure close to R50bn.
The offer for Consol was made by Ethos Private Equity Fund V. Consol’s board said it had received the offer favourably and that it would recommend the deal to shareholders.
Unlike recent offers that have been made for prize assets including Alexander Forbes and Shoprite, shareholders in Consol have little reason to frown on Ethos’s offer.
The price of R19,24 a share, which values the deal at R6bn, represents a premium of 48% to the weighted average price a share up to the day before Consol first issued a cautionary on July 20 ”” alerting the market to the likely buyout.
Although news of the offer reached the market minutes before the close yesterday, shares in Consol spiked 6,26%, or 109c, to R18,50 ”” still a discount of 3,8% to the offer ”” indicating that the market liked the price.
The deal still needs the thumbs up from competition authorities and approval by 75% of votes. One analyst said he was “blown away” by the price and another said shareholders had no reason to complain.
If the deal is successful Consol, which listed just two years ago after unbundling from Anglovaal Industries, which in turn bought Consol from US investor Owens Illinois ”” will again be delisted and vanish from the public eye.
Private equity buyers typically eye businesses that are undervalued. With much kick still left in the South African economy, the delisting of these stocks ”” all retail or retail-related businesses ”” will see investors losing out on the opportunity of taking part in the boom times ahead.
However, while agreeing that it would be disappointing to see Consol disappear from the market, Consol chairman Royden Vice pointed out that the market was undervaluing some high-value companies.
“Consol is a truly public company and this in turn made it more vulnerable to this kind of deal. But private equity firms are prepared to pay these kinds of premiums while the market is undervaluing some blue chips out there,” he said.
In addition to the offered price, shareholders will receive interest on the purchase price at a rate of 7% a year from March 16 next year until payment of the offer, up to a maximum of 17,15c a share. Other partners in the consortium that will provide equity funding are Ontario Teachers ”” a Canadian pension fund manager, Sphere Private Equity Fund I, Sphere Investments and Sanlam Life Insurance. Rand Merchant Bank has underwritten the debt funding.