Shares in South Africa’s Profurn climbed by a quarter on Thursday after banker FirstRand and rival furniture firm JD Group spelt out their rescue plan for the troubled retailer.
FirstRand, which holds 78,8% of Profurn’s shares, has ”requested JD Group to provide selected retail services to Profurn on an urgent basis”, Profurn said in a statement.
As part of the rescue deal, FirstRand and JD Group have also agreed a memorandum of understanding for the sale of the businesses of Profurn to JD Group.
By 1000 GMT Profurn shares were up 26% at 252 cents each, but still well off a year high of R16,40 reached last June. The share touched a high of 270 cents earlier in the Thursday session.
But JD Group’s shares fell 4,7% to R16,30, while FirstRand shares were unchanged at 727 cents.
”It is a phenomenal deal for all the players, every single person benefits from that transaction, even the ordinary shareholders,” said Syd Vianello, a retail analyst at BoE Securities.
But JD Group’s shares fell because investors were initially unhappy about the deal, he said.
”The market initially is expressing negative comment about the deal because they see there is more emphasis on the fact that Profurn has businesses which are operating in areas from which JD recently exited,” he said.
JD Group will pay a maximum of 54,2 million new shares, which shall be adjusted for a deterioration in Profurn’s operating performance for the six months to June 30, 2002.
The 54 million shares are worth about R890-million, while Profurn’s market value is R685-million.
”There is a huge gap there, which means Profurn is worth a hell of a lot more than you think,” Vianello said.
Profurn said FirstRand has entered into talks with a foreign investor to acquire ”a material portion of FirstRand’s eventual shareholding in the JD Group as a result of the proposed transaction”.
If the deal falls through, Profurn and FirstRand will ”reconsider their positions, which, in all likelihood involve the realisation of the underlying net assets of Profurn at a price related to the recently concluded rights offer.”
Earlier this month Profurn’s rights offer of 214 million shares — at 280 cents a share — was very poorly subscribed, leaving underwriter FirstRand with the 78,8% stake. – Reuters