Engineering group ELB’s share price surged by more than 50% on Wednesday after the company announced its plans to buy back shares and delist from the JSE. 

ELB, which has a market capitalisation of about R60m announced its intention to acquire all ordinary shares at R2 each through a scheme, as well as a conditional general offer for the same price.

“As a result of the reduced size of the ELB Group, in terms of both operations and market capitalisation, ELB’s shares have become highly illiquid on the JSE,” the group said.

“And the scheme or general offer, as the case may be, is therefore also intended to provide eligible shareholders with an exit opportunity at a fair price, which may otherwise not be forthcoming in the current economic climate and, in particular, as it relates to the sectors in which the group operates,” the company said. 

The conditional general offer will only be implemented if the scheme fails.

The share buyback will cost R48.5m, which includes estimated transaction expenses. The offer price is a 66.7% premium of the closing price on the day before the intention announcement.

Despite the company undergoing restructuring initiatives this year, ELB continues to face challenges, particularly in its engineering services business. The company entered voluntary business rescue in April.

“Furthermore, as a result of the ongoing downturn in the construction sector and the impact of the Covid-19 lockdown, the remaining ELB businesses are expected to be loss-making in the current financial year and will require further external funding support,” the company said.

In May, the company said it is in the process of disposing of its Australian unit with hopes that the deal will be completed by June 30. 

The business, which operates in Australia and New Zealand, distributes underground construction equipment and waste-processing equipment.

ELB’s share price gained the most since listing in 2010, up 54% to R1.85 at the close on Wednesday. It has fallen 79% so far in 2020.


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