Johannesburg | Tuesday
SOUTH African bank Nedcor said on Tuesday it was mulling its options on its 8% stake in Dimension Data Plc, after the IT group’s shares dived on a warning of a squeeze on margins.
Shares in Nedcor, one of South Africa’s four biggest banks, slid 6.88% to close at R149 — underperforming a 1,6% fall in the banking sector and the overall market’s one percent decline.
The slide was triggered by a 23,5% fall in Didata stock to R22,80 its lowest level since the company moved its primary listing to the London Stock Exchange a year ago.
Nedcor has said it planned to divest its Didata stake, though the IT giant’s woes have put it in a tight corner.
”Our position is that the principle hasn’t changed. But because there has been a material change in the Dimension Data share price, we are reconsidering our position and at this stage we have made no changes to any timetable we might have had,” said Nedcor group strategic director Tony Routledge.
Routledge declined further comment, pointing to a June 22 statement that Nedcor was in talks with Didata concerning its investment. Such ”cautionary statements” are mandatory in South Africa if negotiations can affect a company’s share price.
Didata later reaffirmed it was considering the purchase of Nedcor’s stake, but no price was given.
The value of Nedcor’s investment in Didata has tumbled about R1,8-billion since late May, when Didata’s share traded above R40. On Tuesday morning alone, Nedcor lost over R700-million rand on the investment.
”This…could not have come at a worse time for Nedcor,” said a banking analyst who declined to be named. ”If they sell at these levels they’ll get a lot less than they could have and of course unloading so many shares will just push the price down even further.”
Holding onto the stake was also seen as unattractive option which would not go down well with shareholders.
”If they cling to their stake and say they are long-term investors, the market won’t like it because it isn’t generating any income,” said another analyst. ”They really are between a rock and a hard place right now,” he added.
Analysts have said Nedcor could use any cash it derived from selling all or part of its Didata stake for a number of lucrative strategies, including an earnings enhancing share buyback. – Reuters