African Rainbow Capital Investments (ARCI) shareholders have voted overwhelmingly to approve the company’s delisting from the JSE and A2X and the proposed re-domiciliation from Mauritius to SA.
At a general meeting of shareholders held electronically on Tuesday, almost 94% of voting shareholders approved the resolution to delist the company, while 98% approved the resolution to redomicile the group.
The company’s shares are expected to be delisted from the JSE and A2X on May 29, the company said in a statement.
The redomiciliation is subject to regulatory approvals required under the SA and Mauritius companies acts.
In March, Business Day reported that ARCI was planning to throw in the towel with its listing after years of a persistent discount to underlying assets — a trend that reflects wider investor distaste for investment holding companies.
The imminent delisting of Patrice Motsepe’s investment outfit comes despite the company making progress in closing the gap in the six months to end-December.
On March 18, ARCI, whose prized assets include TymeBank and Alexforbes, said it would delist to return more value to shareholders. The investment holding company said its public shareholding was limited with limited liquidity in its shares.
“The ARCI share price also does not reflect the true value of the investment in the ARC Fund and trades at a discount to the net asset value of the ARC Fund, meaning that investors in ARCI are not receiving the true value of their investment. It is anticipated that the offer will result in a return of value for investors,” it said when originally announcing the delisting.
The discount refers to the difference between a company’s share price and its net asset value (NAV), which in ARCI’s case has been persistently above 40% since listing on the local bourse.
Due to ARCI’s share price discount to NAV, the 50 companies it owns are worth more individually than they are collectively under the holding company’s umbrella. For example, the group, founded by Motsepe in 2015 values wireless broadband start-up Rain at more than R20bn. It holds a 20.3% stake in Rain.
Still, the shares of investment holding companies, locally and internationally, typically trade at a substantial discount to NAV — leaving executives preoccupied with releasing value trapped in the structure instead of focusing on operations.
ARC and ARC SPV offered to acquire all the shares they did not already own for a cash consideration of R9.75 per share.
ARCI has said in the past that at the time of listing, the rationale for incorporating ARCI in Mauritius was its business-friendly environment, the tax treaties that Mauritius has in place and not only to attract capital from investors outside SA (and the Common Monetary Area), but also to facilitate investments outside SA, if required by international investors.
“This strategy has not materialised to the extent expected. ARCI attracted very limited international funding and no funding due to the Mauritian structure.
“Also, ARCI is mainly invested in SA companies... In addition, changes to tax legislation since the ARCI listing have resulted in tax inefficiency for SA resident ARCI shareholders vis-à-vis the underlying SA investments,” it said.
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