African Phoenix to buy preference shares of erstwhile Abil

African Phoenix Investments (API), the company that emerged when African Bank Investment Limited (Abil) came out of business rescue, is giving its preference shareholders a chance to offload their shares. 

API is shifting to an investment holding company and wants to establish a black fund manager structure that will invest in private equities.

The company said it wants to repurchase all 13-million preference shares at R37.50 per share if 75% of preference shareholders vote in favour of this proposal at the annual general meeting in March. 

If there are not enough shareholders in favour of the company’s proposal, API will repurchase preference shares only from shareholders who voluntarily choose to sell.

Preference shares entitle shareholders to a fixed dividend. Though preference shareholders are not guaranteed to receive such dividends, they have a preferential right to be paid before ordinary shareholders and are second in line after creditors to be paid if the company goes bust.

“The board has always said it would like to align shareholders and have only one class of shares. But some shareholders have actually said, please buy us out,” said African Phoenix CEO Siya Nhlumayo.

“We’ve shared the full scope of the new strategy so that preference shareholders don’t remain in the business thinking that we’ll buy another bank and pay dividends as we used to.” 

Nearly five years after the collapse of Abil, API still sits with a large legacy shareholder base. These are investors who put their money in when Abil was still holding an operating bank. The company has 13.5-million preference shares and 1.4-billion ordinary shares in issue. 

Some of the old Abil shareholders have been selling their shares since their suspension was lifted in February 2017. The company said most of the remaining preference shareholders are institutional investors.

Nhlumayo said the change in API’s investment strategy will result in limited dividend flows as growth will come from net asset value of new investments. This will mostly benefit ordinary shareholders. “So if preference shareholders elect to stay, they stay knowing that the strategy of the business has changed.” 

The repurchase offer of R37.50 represents a 40% premium to the average price of R26.70 at which African Phoenix’s shares traded in the past 30 days. 

The company said it already has buy-in from a number of institutional investors. Some of its large shareholders include Steyn Capital, the Public Investment Corporation, Value Capital Partners and Coronation. 

After the repurchase of shares, API wants to establish a BEE investment platform. The company is planning to acquire a stake in a private equity fund that is yet to be established,  which will be known as the API Capital Fund.

It has set aside R500m to invest in the initial stages of the fund, which will be managed by Nhlumayo and current API financial director Shafiek Rawoot. 

Rawoot said it has always been API’s strategy to invest in unlisted equity and the capital restructuring will allow the company to create a “permanently empowered vehicle” that will make it easier to conclude empowerment deals.

The company said it already has a “busy pipeline” of private equity deals, most of which require an empowerment structure.

buthelezil@businesslive.co.za​