As expected, Nampak shares plunged by as much as a quarter as shareholders began trading its nil-paid letters of allocation in the run-up to a R1bn rights offer on September 11.
After trading as low as R216.50, the packaging manufacturer’s stock ended the day down 22.6% at R226.49.
Chronux Research director Rowan Goeller said as the slump was “just a technical correction” as the shares were trading over rights.
Nampak, which had outstanding loans of R5.4bn at the end of March after an ill-fated expansion into the rest of Africa, is also 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.
Nampak is offering 5.7-million new shares at R175 each. Shareholders are entitled to 2.2 rights shares for each ordinary share held on the recorded date, while nil paid letters (NPL) have also been issued to qualifying shareholders.
The nil-paid letters give shareholders the option to either ignore, take up or subscribe for extra shares in a clawback, said Smalltalkdaily Research analyst Anthony Clark. Trading in the underlying shares has been “quite vigorous” over the past few days, he added.
Clark forecasts that most of the NPLs traded over the next few days would be from private clients who perhaps don’t have the funds to follow the full rights issue and may sell part of their rights to at least participate in some of the issue.
“I see institutions being very active in picking up their NPLs,” he said. “I think many institutions, particularly the larger ones, are very keen to get an over-allocation of nil-paid letters because they see the potential in the eventual recovery and rationalisation of Nampak on a 2- to 3-year view,” he said.
Fund manager Coronation has committed as much as R300m, while A2 Investment Partners has agreed to partially underwrite up to R100m, and Numus Capital is putting down R50m.
In August the embattled packaging group appointed Phil Roux as its permanent CEO and said lenders had agreed to refinance its debt, enabling the company to proceed with the necessary sweeping changes to secure its future.
Management has committed to sell various assets, which could raise about R2.6bn in gross proceeds.
Additionally, the planned merger of Bevcan SA and DivFood to to improve efficiencies is proceeding, with the board having appointed a leadership team.
Clark said while he has no doubt the rights issue will be oversubscribed and Nampak would be 100% successful in gaining the R1bn, “the question is how will the NPL trading actually occur in the next few days as the rights issue opens and institutions try to get an over-allocation of stock”.
The group announced the termination of Nedbank Corporate and Investment Banking as its sponsor “through mutual consent”, with effect from October 31.
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