shareholders is a source of disagreement among JSE=20 analysts, reports Jacques Magliolo
The reorganisation and unbundling of Johannesburg=20 Consolidated Investments (JCI), which comes into effect on=20 Monday with the splitting of JCI into three new companies,=20 has aroused scepticism among Johannesburg Stock Exchange=20
From=20next week shareholders will own three JCI shares=20 instead of only one. The present JCI shares will be split=20 into Johannesburg Industrial Corporation (Johnnic:=20 industrial-type interests), Anglo American Platinum=20 Corporation (Amplats: main interest lies in Rusplats) and=20 Johannesburg Consolidated Investments (JCI: non-platinum=20
Analysts are mostly sceptical, but also seem to disagree on=20 the extent to which the new companies will renew interest=20 in JCI. While most mining analysts believe the unbundling=20 exercise will, without doubt, unlock hidden value for=20 shareholders, some believe that this is merely a paper=20 shuffle by Anglo.
“This is not a true unbundling, but only a splitting of JCI=20 into smaller, more focused companies,” says Keith Bright,=20 industrial analyst at Cape Town-based Foord & Mentjes. “I=20 disagree that this semi-unbundling will unlock value as the=20 subsidiaries are still not unbundled,” he says.
Doug Ellish, head of research at stockbrokers Andersen,=20 Wilson & Partners, believes that the listings should=20 provide investors with untapped wealth. He says: “The=20 underlying investments in the three new listed companies=20 should be worth more than the present value of JCI as a=20 whole. The unbundling and the new listings should thus tap=20 into this value.”
JD Andersen mining analyst Bruce Williamson agrees:=20 “Amplats’ interests in the De Beers-controlled Central=20 Selling Organisation (CSO) illustrates the amount of value=20 which should be derived from the splitting of the shares.”
He says that JCI’s interests in the CSO are valued at R950- million, but the organisation paid a dividend of nearly=20 R95-million in 1994. This means that the CSO’s dividend is=20 calculated on a yield of 10 percent. “This is extremely=20 cheap, if compared to De Beers’ three percent dividend=20 yield,” says Williamson.
If shareholders used De Beers’ yield for the CSO, then the=20 organisation’s value (in the books of JCI) should=20 realistically be R3-billion. However, Williamson admits=20 that this is probably the only place where a company is=20
“What else will come out? We will have to wait and see,” he=20
Another problem analysts have with the JCI unbundling is=20 that they do not believe Anglo will easily achieve step two=20 — selling its shares in JCI to black shareholders. Anglo=20 presently owns nearly 40 percent of JCI, which amounts to a=20 market capitalisation of R13,8-billion.
Ellish is one analyst who is adamant Anglo will have=20 difficulty in achieving its ultimate goal of offloading its=20 JCI shares to black shareholders.
“As a meaningful black empowerment exercise it is doubtful=20 that Anglo will achieve its aim,” he says. Williamson also=20 has doubts that Anglo will be able to find a single or=20 large group to buy these shares, particularly if Anglo=20 sells at market related prices.
However, if one looks at previous black entrepreneurs’=20 initiatives in business over the past three years, it is=20 obvious that conglomerates will bend over backwards to=20 offer help.
One business development analyst suggests that Anglo could=20 end up financing the sale of its shares in JCI to a=20 consortium, which would repay Anglo from profits, interest=20 free, over 20 years.