One of Imperial Logistics’s biggest shareholders, the asset management arm of SA investment heavyweight PSG, has objected to the nearly R13bn takeover offer from a Dubai-based multinational as too low, raising a slim prospect of a late push for a sweetened offer.
"Imperial is a good business with an improved composition of businesses and a right-sized cost base and in our view the offer in its current form is too low and does not reflect the fair value or recovery potential we believe the company offers," said Justin Floor, fund manager at PSG Asset Management, a top-five investor in Imperial with a 7.5% stake.
The asset manager is the first major shareholder to come out publicly against the buyout offer, under which Dubai Ports World (DP World) will pay R66 per share, a nearly 40% premium to the price before the offer was made. It values the company at R12.7bn.
The price is about 8% lower than the level at which Imperial traded in early 2019, shortly after hiving off and separately listing its car dealership division, Motus, to become a pan-African company providing logistics and warehouse services for clients spanning food manufacturers, beer makers and pharmaceutical companies.
The deal, which has the backing of the board and management led by Mohammed Akoojee after an evaluation by an independent expert, needs 75% of shareholders to vote in its favour when they meet on Friday. If it goes through, it will underline mounting interest in assets in SA, where valuations have been depressed by an economy that has hardly grown in the past decade and investor worries about political risk after explosive evidence on state capture and the looting rampage in July.
"SA is in dire need of more foreign direct investment, and the move by DP World is therefore a positive one," Floor said in a statement. However, shareholders will not be "adequately compensated" under this offer and "our responsibility as responsible and patient custodians of our clients’ investments require us to exercise our duty in the upcoming vote".
The all-cash bid, which came a month after Heineken, the world’s second-largest beer maker disclosed it had approached liquor maker Distell about a potential tie-up, will hand DP World a company in the middle of deploying cash raised from the sale of businesses in Europe to support its ambitions of becoming a "gateway to Africa" with a full range of transport services.
Shortly after the deal was announced, Imperial said it had agreed to buy J&J Group, an Africa-focused company that boosts its truck fleet by a third and substantially bulks up its presence elsewhere on the continent. The R4.4bn deal will not cause an improvement in the terms of the DP World takeover offer, Imperial said at the time.
"The current offer does not take these developments into account," Floor said, declining to disclose PSG Asset Management’s thinking on what it deems to be fair valuation.
Shares in Imperial have surged almost a third since DP World made the offer in July to about R63, which is slightly below the bid price.
The spread — the difference between an offer price and where the stock now trades — and the potential for a sweetened offer has attracted one of the world’s best-known merger arbitrage hedge funds, Pentwater Capital Management, which took a 5.2% stake in the company at end-July.
Merger arbitrage funds make money from buying shares in a company that is the target of a takeover, betting the price will rise towards the offer price as the deal nears.
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