Ann Crotty Writer-at-large
Lindsay Ralphs. Picture: FINANCIAL MAIL
Lindsay Ralphs. Picture: FINANCIAL MAIL

Bidvest CEO Lindsay Ralphs says his purchase of 30.3-million shares in building supplies group, Distribution and Warehousing Network (Dawn) was a personal investment and had “absolutely nothing to do with Bidvest”.

Ralphs was commenting on Friday, just days before Monday’s meeting of Dawn shareholders, who have been called to vote on a 1c a share offer from Polanofield, a company involving former Dawn CEO Derek Tod. 

News that Ralphs had acquired the shares, equivalent to 5.16% of the company, sparked speculation that Bidvest might be preparing to make a counter offer. On Friday, the Dawn share price doubled to close at 2c. But a spokesman for Bidvest said on the day that the company would “definitely not” be making an offer for Dawn.

In early December the Dawn share price plummeted from 8c to a record low of 1c when the company announced that it had received the offer from Polanofield. The offer valued the company at R5.8m, which was significantly below the end-March 2018 audited net asset value of 50c a share.

In early 2017 shareholders, led by Coronation Fund Managers, Investec, RAC Investments and Ukhamba, backed a R350m rights issue pitched at 100c a share. Towards the end of that year the board, and a new management team, assured shareholders that the company would be solvent and liquid for the next 12 months and that it would be profitable in the 2019 financial year. In early 2018 Dawn sold its 49% stake in Grohe Dawn WaterTech for R324.5m.

Tod founded Dawn and listed it in the late 1990s. He then embarked on an acquisition spree that built a multibillion-rand building supplies empire spanning hardware, sanitaryware, plumbing, kitchen, engineering and civil products, as well as manufacturing pipe and fittings. He retired in 2015 after disappointing results knocked the share price from R12.97 to just above R6 in a few months.

The poor performance was blamed on the slowdown in activity in the building sector and increased competition in its niche markets. Tod still owns about 11-million Dawn shares.

Ralphs’s purchase, which was valued at just R310,000, was one of many made in December after the 1c offer had been announced.

Chris Logan CEO of Opportune Investments, which had held Dawn shares for several years, said: “The buying indicated investors believed another offer would be flushed out.” He added that somebody with expertise in the industry should be able to reduce the company’s steep overhead costs.

The most recent evidence of the cost-cutting that has already been implemented was the resignation of external auditors PwC earlier in January. Chairman Theunis de Bruyn told Business Day the company had secured new auditors but would not reveal the name. He said he expected Dawn to be de-listed on February 18.

The circular issued in mid-December said shareholders with 38.16% — Ukhamba with 21.18% and RAC Investments with 16.98% — had given irrevocable undertakings to support the Polanofield offer. This was significantly below the 60% support that had been claimed in a Sens announcement released on December 3. But by the close of business on Friday there was no sign of a new bidder on the horizon.

The independent experts BDO Corporate Finance determined that the shares had zero value and said that the 1c offer was fair and reasonable.