Anchor Capital is joining a long line of companies who have recently delisted from the JSE as the high cost of regulation outweighs the benefits of remaining a publicly traded company.
The financial services holding company, which was founded in 2012 and listed in September 2014, now has R64.9bn worth of assets under management.
Anchor said on Friday that it would offer R4.25 per share, which is 7.59% higher than the closing price on Thursday. Shareholders will vote in December on whether to accept the buyout.
The planned delisting highlights a growing threat to the JSE’s sustainability and diversity.
In 2019, 24 companies delisted and in 2020 mining holding company Assore, industrial company Afrox, former Business Day owner Tiso Blackstar, Intu Properties, claddings specialist Mazor and hedge fund manager Peregrine Capital are among those that have announced they are going private.
In recent years, companies with smaller capitalisations have been poorly traded resulting in flat share prices. This makes the costs of publicly reporting their financial results, as required by the JSE rules, not worth it.
“If the market is buoyant and small companies get rewarded, they can stomach the costs,” Anchor Capital CEO Peter Armitage said.
“When an average small cap company’s share price floats at the same price for over five years, the costs of all the regulation outweigh the benefits of listing.”
Piet Mouton, CEO of PSG, also recently said that JSE red tape was becoming excessive. “This is inherently unfair ... the environment that listed companies have to operate in compared with unlisted companies.”
Delisting will allow Anchor to borrow more debt at the current low interest rates to invest it. It will make it more competitive. “Anchor’s direct competitors are unlisted and are therefore not obliged to comply with onerous public disclosures,” it said in a statement.
The price Anchor has offered has left at least one minority shareholder, Anthony Clark, unhappy. He said the buyout price was “cheeky and opportunistic and undervalued Anchor” in light of its likely future earnings.
The R4.25 per share is 50c higher than the weighted average monthly price of R3.80. Clark believes R5 a share would be a fairer price, but felt minority shareholders who did not wish to stay in an unlisted company had no choice but to accept the offer “unless there was some institutional backlash”.
Armitage defended the price: “We obviously put in a huge amount of effort of coming up with the price. Whatever price we put out, we expect some shareholders will want more.”
He said the independent expert hired to value the business spent a great deal of time calculating a fair valuation and the independent directors spent a lot of time assessing that the valuation was reasonable. Anchor Capital will borrow up to R280m to buy back shares. It would cost another R50m to R100m in debt to pay R5.00 a share, which Anchor feels is too risky.
The share price has traded between R2.80 and R4.33 since mid 2018. The stock has traded below R4 since about February.
Armitage said if investors had intended to sell their shares in the next year, “it would be attractive to take up the offer”.
Shareholders can choose to keep some or all of their shares invested in the unlisted company.
Anchor’s chair and representative of large shareholder Masimong, Mike Teke, said the delisting would help Anchor become majority black-owned. “The proposed delisting will help achieve the objectives of facilitating Anchor becoming 51% black-owned and increasing management’s stake.”
Additional reporting by Alistair Anderson
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