Alec Hogg, David McKay, Byron Kennedy, Belinda Anderson and Bruce Whitfield No fewer than six Johannesburg Stock Exchange-listed companies are currently either trading under cautionary, because they are in merger talks, or are actively seeking new partners. The Moneyweb team compiled this rundown of the JSE’s most imminent take-over targets and their likely suitors.
Corpcom: Bland cautionary issued on March 1; renewed with interim results on March 26 2001. Most likely suitor: A foreign outdoor advertising industry multinational.
The dominant player in South Africa’s outdoor advertising market, Corpcom is negotiating the introduction of a new equity partner, probably as the controlling shareholder. Earlier this week CEO Barry Sayer confirmed that discussions are at an advanced stage. ”Negotiations are going positively and we hope that within, say, three weeks or so we should have finalised situations one way or the other.” That would put finality at the end of April.
A full 70% of the equity is owned by Corpgro, which has made no secret of its desire to exit in line with a strategy of focusing its attention on financial services. With the competitions commission certain to veto any proposed acquisition by Corpcom’s local competitor Primedia, the other party to the transaction is almost certainly one of a handful of major international outdoor advertising companies.
Corpcom’s attraction for a foreign buyer is the combination of a powerful presence in South Africa and solid representation in other parts of the African continent, where it operates in 17 countries. About a third of its operating profit during the half year to end-February were generated outside of South Africa.
Kagiso Media: No cautionary at present. Most recent one withdrawn March 13 2001. Most likely suitor: Nail Media. After months of negotiations, Kagiso Media pulled the plug on its proposed R360-million acquisition by the larger Primedia on March 12 after the suitor was unable to come up with the R250-million cash tranche of the deal. Primedia’s CEO William Kirsh blamed it on his group not being able to sell off enough non-core assets quickly enough, specifically the proposed offloading of its European cinema interests worth an estimated R400-million to the group. He is still keen to do the deal.
More relevant still is the clear decision by Kagiso executives (egged on presumably by the directorate) to find a partner. Interviewed on Moneyweb’s Classic Business two weeks ago, CEO Roger Jardine said: ”Kagiso Media fully accepts that consolidation in the media industry is a reality.” He said a deal with Primedia is still possible, but noted that there is a more likely partner in fellow black empowerment operation Nail. ”Nail certainly is a very attractive partner for Kagiso Media. We are in Jacaranda with them. We are with them in Radmark and, yes, we’ll talk to them.”
With cash of more than R600-million, Nail Media has more than enough firepower to land the well-managed business whose prized interests are its 90% of East Coast Radio and 42,5% of Jacaranda Stereo (bought in 1998 for R138-million). Other assets that would appeal to a rapidly expanding media group are Kagiso’s Exhibitions business, 50% stakes in publishers Systems and Butterworths, 33% of Radmark and 24,9% of Radio Oranje.
Western Areas Limited: The Kebbles are known to be looking for a buyer for South Deep, but while North America’s Barrick has expressed an interest, a deal is looking increasingly unlikely.
Deputy chair Brett Kebble raised the prospect last year of selling the company’s 50% in South Deep, a West Rand-based gold mining project with about 90-million ounces of resources. Barrick Gold was among the lead suitors invited to the mine ahead of an official due diligence. The market expected a decision from Barrick a month ago and it’s thought the excessive selling price demanded by Kebble has deterred the North Americans.
Placer Dome owns the other half of South Deep (and has management control), having paid $235-million in 1999. Kebble is thought to be asking $350-million or more for the other, non-controlling section; hence Barrick’s reticence. Hopes for a deal the preferred option in the market are now receding fast. Expect Kebble to decapitalise the balance sheet against the developing asset.
Iscor Limited: Iscor announced at the end of January that it would be undergoing serious restructuring and would be selling off part of its business.
Anglovaal Mining is leading an attempt to oust current Iscor management a strategy expected to end with the dismantling of Iscor’s mining and steel assets. The Industrial Development Corporation (IDC), which with Avmin holds about 27% of Iscor’s share capital, is believed to support Avmin’s attempted coup. In the meantime, Iscor is hoping to push through its owns plans to have the company split into two separately listed parts: Iscor (steel) and a new company provisionally titled Minco, representing the mining assets.
The affair is expected to come to a head at an extraordinary general meeting of shareholders slated for April or May at which Avmin’s plot or Iscor’s will be voted through. A circular is scheduled for release this month providing relevant dates.
Gold Fields Limited: There is intense speculation around this share and that AngloGold is plotting ways to take it out.
There is no cautionary, but reports that AngloGold wants to take out Gold Fields are widespread and, according to anecdotal evidence from both management teams, appear to be true.
The problem is AngloGold needs to conduct a friendly merger because it does not have the bank balance to pay a huge premium. It can’t rely heavily on its parent Anglo American for much help as the latter is taking a dim view of the gold market now that new CEO Tony Trahar is in control. A share deal is unlikely to be welcome at Gold Fields and the latter is also likely to ask AngloGold to radically change its stance on hedging. There was a meeting between AngloGold, Barrick and Gold Fields in London recently, but the outcome was impasse. Barrick is on the fringes of the deal because AngloGold can’t swallow Gold Fields alone.
Advtech: Takeover talks have been under way for some time and the deal is still subject to due diligence.
Advtech is still engaged in discussions with the Calajero consortium led by corporate financier Mark Barnes and entrepreneur Jonathan Beare about a possible take-out of the company. The first cautionary announcement was released on January 9. The offer on the table still subject to due diligence is at 75c a share, but could be marked down to a minimum of 60c, depending on the findings of a closer look at the company.
If the deal is successful, the group could be delisted and relisted in its new form. If so, shareholders would have the option to invest 35% of the proceeds of the sale into the new entity. Advtech was due to release its year-end results for December this week. Earlier on in the week the stock was trading at 42c. Why is the gap not closing?