By the top of this yr – if all goes in accordance with plan – as many as three JSE-listed funding holding corporations will probably be no extra.
PSG Group stunned the market on March 1 with the announcement that it could unbundle all of its holdings (save for Zeder and a portion of its stake in Stadio) to shareholders and take what stays non-public.
The pre-eminent funding holding firm of the JSE within the final twenty years would now not be listed. It has introduced a lot of high quality companies to the fairness market – dwarfed by the blowout success of Capitec – and this really represents the top of an period.
However it’s not solely PSG Group that’s fading from public view.
In September, RMI Holdings mentioned it could unbundle its stakes in Discovery (24.8%) and Momentum Metropolitan (26.8%) to shareholders. This may’ve left it with two core belongings: an 89% stake of OUTsurance and 30% of the UK’s Hastings.
It has since accepted a R14.6 billion provide for the Hastings stake from its accomplice Sampo, which implies the one remaining asset will probably be OUTsurance.
It says it would nonetheless proceed with the “restructure” (learn: unbundling), however will now not must undertake a rights challenge to settle debt on the centre.
A week ago, it mentioned the board had determined “to not proceed with the lively funding technique as beforehand outlined to RMI shareholders and has due to this fact determined to embark on an orderly and managed transition to a construction that represents an efficient itemizing of OUTsurance”.
No extra RMI, only a pure short-term insurer.
And in November, Brait spelt out that its post-Covid focus can be to “monetise New Look and Consol” in addition to “goal [an] IPO for Premier”. It has achieved the sale of Consol. If market circumstances are conducive, it says Premier will listing as quickly as this yr.
That would depart Virgin Energetic as the one materials asset within the listed Brait entity (presuming the companions at Ethos handle to discover a purchaser or answer to the New Look funding).
In apply, it’s barely extra sophisticated, as there may be debt on the centre and the small issues of a convertible bond and the brand new exchangeable bond (each due in 2024). An IPO of Premier (valued at R8.4 billion) would go some strategy to fixing Brait’s debt drawback (R6.8 billion). It successfully has to get the timing spot on for the sale of the New Look holding in addition to a Premier IPO and on the similar time make sure that what’s left – i.e. Virgin Energetic – is rising.
When Ethos took over the administration of the listed Brait entity in 2019, it mentioned that methods can be reset to make sure core belongings had been “exit prepared in three to 5 years”. The clock is ticking.
On the time of its announcement, PSG Group shared a slide that in contrast the reductions at which six funding holding corporations on the JSE had been buying and selling to their sum-of-the-parts. Reductions within the final three years have been within the 40% to 46% vary, in contrast with common reductions of 25% and 22% in FY16 and FY17. You’ll be able to see the issue.
Funding holding corporations are out of vogue. And this isn’t only a South African drawback. If this development continues there’ll quickly be treasured few listed holding corporations available on the market.
Other than the various causes highlighted by PSG Group in recent times as to why funding holding corporations are buying and selling at giant reductions to NAV, CEO Piet Mouton additionally offered a brand new one: the so-called “tax lure”.
If PSG needed to promote all its investments and distribute money to shareholders, the capital good points tax (CGT) payable can be roughly R3.3 billion, representing a 13% discount to the sum-of-the-parts.
After CGT and dividend-withholding tax, the online money dividend to PSG shareholders can be round R85 a share, roughly the place the group had been buying and selling previous to the unbundling announcement.
Mouton additional drove the purpose residence: funding holding corporations may elevate R100 in fairness, however due to the reductions (attributable to a number of causes, least of all of the tax lure he highlighted), the following day that fairness can be value R70.
Remgro, the commercial belongings of the Rupert empire with a market worth of over R81 billion, is busy with a gradual reshaping of its portfolio “in the direction of larger unlisted asset contribution” which can “deal with structural inefficiencies”.
It has already mixed its fibre belongings with Vodacom to additional scale up that enterprise. And it’s been driving the restructuring of subsidiary RCL Meals, which can possible see Rainbow Hen being re-listed (doubtlessly the sugar belongings too) and a commerce sale of logistics enterprise Vector. This can go away a slimmed-down groceries unit within the present listed entity.
RMB Holdings – now nothing greater than a ‘shell’ with possession stakes in numerous property entities – has mentioned it would monetise these over time, that means it too will disappear from the market.
And tiny Zeder (majority-owned by PSG Group) can also be busy with a gradual, orderly wind down. It’s already taken main choices relating to two of its holdings (the sale of The Logistics Group and the unbundling of the Kaap Agri holding), leaving an additional two of consequence (Capespan and Zaad). One will get the sense that PSG will probably be seeking to offload the previous and take in the later into its PSG Alpha non-public fairness enterprise.
This can go away Remgro, Hosken Consolidated Investments (HCI; R9.2 billion market cap) and African Rainbow Capital Investments (R8.3 billion) because the final ‘pure’ funding holding corporations available on the market.
HCI’s future is trickier given the big commerce union – Southern African Clothes and Textile Employees Union (Sactwu) – shareholding.
Concerning ARC Investments, one would think about the 2 ‘Johans’ (co-CEOs Dr Johan van Zyl and Johan van der Merwe) have some type of a medium-term plan to unlock worth, now that it’s painfully apparent that these belongings will commerce at such a big low cost. It has begun to tidy up and focus the portfolio, and a list of Rain is definitely no more than 5 years away (probably nearer). The remainder (primarily monetary companies) may be taken non-public, or father or mother ARC may listing a portion of the bigger monetary companies group is has been steadily constructing.
(This additionally presumes Piet Viljoen and Jan van Niekerk’s RAC Restricted will probably be renamed ‘Goldrush’ and its itemizing moved to the gaming sector. Its 58.8% stake within the ‘various gaming’ operator contains 92% of belongings and the transfer is lengthy overdue. Following a portfolio restructure, Astoria homes the remainder of what was in RAC – stakes in a specialist retailer, diamond miner, and smaller investments in a personal schooling enterprise and one servicing second-hand automotive sellers.)
This leaves the Prosus/Naspers hydra, which would require the ‘decision’ (in well mannered phrases) of its Tencent shareholding to unlock any worth in any respect.
As soon as that’s finally unbundled (or bought), there’ll be no want for the weird cross-holdings between Naspers and Prosus (itself an try to slender the ever-widening low cost). The buildings can all be collapsed … however traders ought not get their hopes up on this one.
Pay attention: Schalk Louw, portfolio supervisor at PSG Outdated Oak on whether or not holdcos are carried out (read transcript)