Could Zak Calisto ease his chokehold on Cartrack?
The chokehold CEO Zak Calisto has on the vehicle tracking company could ease if new buyers show more interest
Zak Calisto, the founder and CEO of fleet management and vehicle recovery services firm Cartrack, is open to selling down his 68.5% interest in the firm — provided the price is "right".
The telematics firm, which started operating in 2004, has grown exponentially, with a footprint in 23 countries across Africa, Europe, North America, Asia Pacific and the Middle East.
It is one of the better-performing stocks on the JSE, with its shares up more than 27% since the beginning of 2019, outpacing the all share index, which is up 7.6%.
It’s not hard to see why: for six consecutive years, Cartrack has delivered double-digit revenue and subscription growth.
It recently topped 1-million subscribers, from just under 250,000 in 2012.
That means it has managed, through SA’s economic lean years, to grow customers by an average 21% per year.
In the same period, compound subscription revenue has grown by 24% and the trend replicates in earnings growth.
Yet, despite the consistently strong financial performance and metrics, not a single analyst covers the company, which has been listed on the JSE since December 2014.
The problem is the CEO’s iron grip on its stock.
In a somewhat peculiar shuffle, Calisto’s investment holding firm, Karoo, recently increased its stake in Cartrack to 68.17%, by shelling out just over R2.7bn for 204.5-million shares owned by another Calisto vehicle, One August.
Along with his personal stake of 0.28%, that takes his total holding to 68.5%.
The One August sale triggered a mandatory offer to minorities, pitched at R13.44 — the highest price at which Karoo had bought Cartrack shares in the six months before the offer.
Not surprisingly, none of the firm’s six key minority shareholders — which include Gobi Capital LLC, Global Asset Holdings, Georgem Holdings and Coronation Asset Management — accepted the "offer", given its present price of R18.75.
So is Calisto amenable to loosening his hold on the company?
"I am definitely open to that … I think the right time will come when the new shareholder will get a good value and I will get fair value. At that point in time, I will definitely sell down my shares," he tells the FM. But he intends to remain a controlling shareholder.
"I will look at it at the right price and time. I do not need to own so many shares. But I also do not want to sell myself short."
The problem is that Calisto’s reluctance to sell himself short by releasing stock is arguably what is keeping the share price "hampered", as he describes it.
Still, being a tightly held stock has its benefits. It’s a good defence mechanism against a hostile takeover. Having fewer shareholders makes it difficult for an investor to launch a takeover bid by building up a position in the open market.
And Calisto says Cartrack has had suitors. "There have been a few conglomerates approaching us. So Cartrack is a potential target for bigger players. If you look at the industry, there is a lot of movement in terms of private equity players doing acquisitions at the moment. The tyre companies are doing a lot of that. The private equity industry wants to get to the business intelligence of automotives. As our technology develops further, the more interest there is," he says.
On the other hand, Calisto is reluctant to play the role of acquirer.
"You need a special type of person to do acquisitions. I am not that guy. I am a start-up person," he says.
Instead, the company’s immediate priorities are to invest in research & development, data analytical skills and distribution channels to expand and grow its subscriber base to its next target of 5-million.