Trans Hex buyout deal on the cards for minority shareholders
Long-suffering shareholders could receive a buyout offer. But the deal won’t include three large investors
Trans Hex is willing to pay a more than 100% premium to take the struggling diamond business private, by buying out long-suffering minority shareholders. It has been listed on the JSE for nearly four decades.
Last week Trans Hex said it could make an offer to minority shareholders at 100c a share, well above the 42c-53c range the share has traded at between the start of May and the end of June.
The biggest Trans Hex shareholders, Cream Magenta 140, Metcap 14 and RAC Investment Holdings, have been excluded from the offer. Cream Magenta and Metcap are investment entities linked to retail tycoon Christo Wiese, while RAC Investment Holdings is tied to listed investment counter RECM & Calibre (RAC).
Collectively the three entities own almost 80% of Trans Hex.
RAC’s willingness to stay with Trans Hex is somewhat surprising. In the company’s latest annual report, CEO Piet Viljoen wrote that Trans Hex had been a consistently noticeable drag to RAC’s results. "With the benefit of hindsight, we should have passed on this opportunity when it was first presented to us."
Trans Hex does, however, hold a "hard" NAV of 268c a share with a R65.5m cash underpin (equivalent to about 57c a share).
While the SA operations have disappointed, profit from the continuing Angolan operations topped R95.5m at the end of March — comprising equity accounted profit of more than R50m from its Somiluana Mine and a fair value gain of R52m (less head office costs of around R7m).
The proposed buyout offer also comes hard on the heels of Trans Hex attempting to dispose of assets.
Recently the company entered into negotiations to sell shares held in underperforming subsidiary West Coast Resources (the old Namaqualand mines that belonged to diamond mining giant De Beers).
It is uncertain what proceeds could be raised if this deal materialises. But Viljoen, again writing in RAC’s annual report, noted that West Coast Resources looked like a fantastic project on paper. "In the real world, it has consistently fallen short of even our very low expectations."
In May Trans Hex accepted an offer from the University of the Western Cape to acquire its head office property in Parow for R30m (compared with a carrying value in Trans Hex’s books of under R1.2m).
*The writer holds preference shares in RECM & Calibre