Nampak has received JSE approval to proceed with as R1bn rights offer, bringing the debt-laden packaging group a step closer to a major overhaul that will shift the focus to its core metals business and selling noncore assets.
The offer, comprising the issue of new Nampak shares at R175 each, is set to open on September 11. The company said shareholders will be entitled 2.20902 rights shares for each ordinary share held on the recorded date.
The subscription price is a discount of about 23.49% to the 30-day volume weighted average traded price of the ordinary shares at the close of business on August 30, Nampak said.
The shares closed the day 1.16% higher at R276.16 after earlier rising as much as 8.8%.
The proposed capital raise appears to have been well received by shareholders, with fund manager Coronation committing as much as R300m, while A2 Investment Partners committed to partially underwrite by up to R100m, and Numus Capital committed up to R50m.
SmallTalkDaily analyst Anthony Clark expects the offer will be fully subscribed.
Nampak has been hamstrung by debt that stood at R5.4bn in the six months to end-March after an ill-fated expansion into the rest of Africa and is now preparing for huge job cuts, salary freezes and a reduction in overtime as it battles a cash crunch that has eroded its share value over the past five years.
The details of the capital raise come a day after debt-laden packaging company announced it had entered into a deal with Twinings Ovaltine to sell the property and equipment of its now mothballed Nigeria metals business for 7.50bn naira (R180m) in a bid to streamline operations and reduce its debt pile.
Nampak, which recently reached a deal with lenders to restructure its debt and undertake the rights offer, has already closed the Nigerian metals business owing to subdued demand for the metal can products it produced.
The business previously accounted for just 1.47% of Nampak’s revenue, while the property and equipment had a book value of about R29m.
“The disposal will assist Nampak in its focus on the balance of its portfolio and to reduce its interest-bearing debt,” the company said.
Clark said the deal signified that Nampak’s management was out to prove naysayers wrong.
“There was quite a bit of chatter that Nampak wouldn’t actually be able to transact in Nigeria, given the difficulty of the economy and the volatility of the exchange rate,” Clark said. “What this deal clearly indicates is that Nampak is able to do deals in Nigeria ... and this sale is the start of that process.”
The plastic, paper and metals packaging manufacturer, which is valued at R770m said the deal is subject to various conditions.
To optimise the capital structure of the group, management has committed to an asset disposal plan, which could raise it about R2.6bn in gross proceeds.
Besides the sale of the plan in Nigeria, the turnaround plan includes divesting from Ethiopia, Kenya and Tanzania, The group hopes to realise cash of as much as R250m through the sales.
In May, Nampak said it had reached an agreement with Canda (T) Investment Co. to sell a property in its Tanzanian manufacturing business for $5.5m (R109m).
“Good progress has been made in respect of the asset disposal programme and we remain confident that the R2.6bn target will be realised, with a critical focus on high-value assets,” Nampak said on Thursday.
The merger of Bevcan SA and DivFood is progressing according to plan, with the board having appointed a leadership team, it added.
Full details of the rights offer will be contained in a circular to be published on September 4.
Note: August 31 2023
This article has been updated with analyst commentary
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.