Ann Crotty

By Ann Crotty


JSE thrives in lockdown

It turns out that not knowing what is going to happen from one week to the next is great for trading volumes.

A little-noticed revelation last week was just how well the JSE is doing out of Covid-19 and the jittery investor sentiment it has sparked across the globe.

One week it was the end of the world as we know it and shares had to be dumped; the next week, well, maybe not, so let’s buy shares. And so, for the past two months trading on the JSE has been at record high levels.

“The number of equity trades has been double the average of previous years,” the JSE’s recently appointed CEO Leila Fourie told shareholders at the annual general meeting last week.

And so, despite increased costs relating to executives and Covid-19 expenses, the company is on target to hike interim earnings by between 16% and 24%.

But the listed market regulator is not relaxing. It refers to the “structural impediments and low growth environment facing the South African economy and financial markets”. This is why it’s determined to finalise deals such as the purchase of share registry Link Services; a deal the competition authorities aren’t too happy about, which is understandable given the JSE’s unique position as a regulator.

Board talk

Fourie, who took up the top job last October, used the opportunity to thank her executives and fellow board members “for their tremendous support in on-boarding me”.

That particular ‘on-boarding’ was overshadowed the very next day by allegations of ‘over-boarding’ laid at the AGM highlight of the week, the two-hour Standard Bank Group (SBG) affair. One of the many vexed shareholders in attendance suggested that some of the SBG directors were ‘over-boarded’, which apparently doesn’t mean they’ve fallen over but that they are on too many boards.

From a technical perspective both AGMs were unsatisfactory.

The JSE allowed voice questions but the sound quality was poor. For some reason SBG was unable to deal with the technical requirements needed to allow voice questions so shareholders had to send through written questions, which didn’t help ease tensions between the bank executives and the shareholder activists who were concerned about lack of independence of some board members.

Rather disappointingly, SBG fell back on the old trick of indignantly interpreting questions about independence as an assault on the directors’ integrity.

It’s likely SBG didn’t worry too much about failing to get their directors elected this year, but given the steady increase in mainstream support for activists, they might be worried about next year.

Retail sector

Pepkor probably doesn’t worry too much about making friends these days, particularly among its long-suffering shareholders. Last week’s placement of an additional 5% of shares at a low of R11 won’t have won it too many friends. The proceeds – R1.9 billion before costs – will be used to reduce gearing and provide some financial flexibility.

Read: Edcon creditors’ bid to halt restructuring meeting rejected by court

Also on the retail front, only sad news out of Edcon; it’s difficult not to suspect the business rescue practitioners are entertaining bidders with little substance just to keep the process ticking over. And what a sad indictment for the Public Investment Corporation (PIC) that its client, the Unemployment Insurance Fund, emerges as the single largest creditor with an R889 million exposure.

Sun International

The assault – or is it a bid? – on Sun International looks familiar. On Tuesday Chilean investment firm Nueva Pacifico Sur (IPS) went public with an unsolicited bid for the resort and gaming group, which has operations in Latin America. IPS offered R22 a share for a 50.1% stake in Sun International plus a bridge loan and commitment to underwrite more than half of Sun International’s planned R1.2 billion rights offer. The offer values Sun International at R3 billion and was a hefty premium on the R15 at which it was trading ahead of the unexpected announcement.

Read: Not much of a gamble for high-stakes players

Sun International executives were not impressed, neither was the company’s second largest shareholder Value Capital Partners, which said the offer significantly undervalued the company. CEO Anthony Leeming described the R22 announcement as neither an offer nor a firm commitment to make an offer and said they had received several similar non-binding proposals from IPS in the past, all of which came with stringent preconditions.

Does that not bring back memories of the seven-month bidding war for Adcock Ingram back in 2013? That ‘bid’ saw Chilean pharmaceutical company CFR, backed by Adcock management, do battle with Bidvest for control of what had been a poorly performing business. The battle raged for months without CFR even submitting a formal bid. Bidvest, with the support of the PIC, eventually prevailed but paid too high a price.

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Johannesburg Stock Exchange (JSE) Lockdown

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