PETMIN looks set to delist from the Johannesburg Stock Exchange following a takeover offer from a private equity firm which values the mid-tier coal producer at R894m – a 15% premium to its December 15 close.
Shareholders in Petmin may elect to receive R1.55 per share in cash or accept a scheme of arrangement in which they will receive linked shares consisting of one ordinary and one preference share in the newly created private company.
The linked share, which will be issued to shareholders who want to reinvest in Petmin, has been priced at R1.60 per Petmin share, slightly higher than the cash offer in an effort to keep Petmin’s share register stable.
The offer is from CapitalWorks Private Equity which describes itself as “a leading, mid-market private equity business”. It is based in Johannesburg with some $500m under management.
Petmin said in an announcement today that irrevocable undertakings had been given to the offer equal to just over 34% of Petmin shares including management which holds 7.74% of the company.
The newly formed company, which is called Bidco currently, will be operated by current Petmin management whilst board representatives from CapitalWorks will also be appointed.
The removal of costs in maintaining a listing on the JSE was one of the benefits of the offer, said Petmin. It also said the offer represented good value.
Shares in Petmin were nearly 10% higher on the JSE in the first hour of trade following the announcement. On a year-to-date basis, shares in the company are 12.5% higher, but 50% weaker over the last five years.
Petmin’s principle business is the mining of anthracite coal, as well as smaller volumes of thermal coal, from its Somkhele mine in KwaZulu-Nata province.
It also a 40% stake in a North American pig iron project called North Atlantic Iron Corporation (NAIC). The development of the project has long been on the drawing board.
Petmin said in September that it intended to begin sourcing funds for the $250m project in the fourth quarter of this year once it had completed a feasibility study.
The delisting of Petmin sees the departure of a second mid-tier mining company from the JSE after Trans Hex said in August it was to go private.
Petmin management has frequently complained that its shares were undervalued by the market which was one of the reasons it embarked on a buy-back of its shares. Between October 2015 and March 2016 it had bought back 7% of its shares.
Production of saleable anthracite at Somkhele was 7% lower at some 2.8 million tonnes in the year ended June 30, the company said in September. This was owing to a geological problem at the mine whilst efforts to conserve water following a drought in the region also affected capacity at one of Somkhele’s wash plants.
Commenting on prospects for its 2017 financial year, Petmin said anthracite production would increase 4% whilst sales would improve a fifth after it had placed an inventory build up in 2016.
