ASSORE had investigated ways it might improve its trading liquidity before deciding the best option was to buy-out minority shareholders, said Kieran Daly, executive of growth and strategic development at the bulk minerals investment company.
“We did look at the corporate structure in order to make it more liquid but in the end we weren’t able to do something. We also thought it could be a great time to do a share buy-back, but then that would have reduced our liquidity and put us in trouble with the Johannesburg Stock Exchange (JSE),” he said.
Daly was commenting in an interview with Miningmx on March 10, the day after Assore announced it would buy the shares owned by minorities – a proposed R7.8bn transaction that already has the support of Investec and the Public Investment Corporation (PIC). The two investors account for over half of Assore’s 17.4% free-float.
Assore has proposed a scheme of arrangement in which it will use its internal cash resources, recently reported at the interim stage at some R8bn, to buy back shares in the firm at R320 per share.
The offer price is equal to a 27% premium to the 10-year average share price of some R252/share, and excludes the recently announced interim dividend of R7/share. The offer also represents a 10% to 20% premium to current consensus broker price target range for the share of between R270 to R290/share, and a 51% premium to the 30-day volume weighted average price (VWAP) for the share (R212/share).
“There’s nothing particular going on,” said Daly in response to a question about whether it might be easier for Assore to press on with corporate activity away from the public gaze.
“We have our strategic shareholders who dominate (the share register), including the Sacco family, which has one view of life, and then we have institutional shareholders who have a different view on things. In the end, the reality was that the value of our minorities and the available cash we had lined up.”
“It is a case of business as usual,” said Daly on what life will be like post the takeout of minority interests. He added that the lack of liquidity was also leading the stock to under-perform, hence the interest at one stage in the process in the share buy-back.
In addition to Oresteel Investments, which has 52.4% of shares issued and consists of the Sacco family interest and that of Sumitomo Corporation, some 26.1% of Assore is owned by black economic empowerment interests.
Assore has a 50% stake in Assmang, a company that mines and beneficiates ferrochrome and iron ore.
Assore reported headline interim earnings of R3.7bn last month compared to R4.3bn in the previous interim period. It paid a R7/share interim dividend, down from a R10/share interim dividend in 2018.
Daly said that once the takeout of minority shareholders was complete, the firm would have “to build up the kitty” again – a process that would have to be done in a confusing, volatile world of low ferrochrome and chrome pricing, relatively buoyant iron ore demand, but a degree of uncertainty as a result of the COVID-19 crisis and oil price war.
Assuming the transaction proceeds, Assore will be delisted from the JSE after 70 years of trade – a historic and potentially telling moment for the exchange, especially in respect of its mining shares. AngloGold Ashanti is to take its primary listing to the UK or the US, whilst Sibanye-Stillwater has raised the prospect of a primary offshore listing.