Metair’s share price rose to its highest level since January after it said it was selling its stake in a company that formed part of its Turkish division, Mutlu, for $110m (R1.95bn).
The deal, announced on Tuesday, is set to derisk and minimise Metair’s exposure to the challenging operating conditions and hyperinflationary atmosphere in Turkey, where the lira’s depreciation and high interest and inflation rates affect the company’s results, which are reported in rand.
The proceeds of the cash sale of Metair Akü Holding Anonim Sirketi to Quexco, are earmarked to capitalise Metair’s automotive wire harness business, Hesto, and the settlement and refinancing of some debt, the vehicle parts maker said.
After rising as much as 18.39% in intraday trade, Metair’s share price ended the day 7% higher at R16.06, in its biggest one-day gain since July 12. The company, with a market capitalisation of R3.2bn, has seen its share price gain 28% over the past six months.
The Johannesburg-based firm said the disposal, signed on September 16, would help strengthen its balance sheet and the subsequent deleveraging would free up capacity to focus on growth in the sector to drive value for shareholders.
The disposal “ultimately enhances Metair’s operational risk profile”, the company said. “The proceeds from the disposal will enable Metair to deleverage its balance sheet by addressing three of its key near-term liquidity requirements.”
Metair said the disposal provided an opportunity for shareholders to unlock value through a potential rerating of the company’s share price as a result of an improved operational and financial risk profile.
The value of Metair’s net assets in Turkey at end-December 2023 was R2.9bn and the loss attributable for that period was R70.6m, Metair said.
Chronux research analyst Rowan Goeller said that given the currency hyperinflation in Turkey, the sales price appeared appropriate for the risks in the region and the financial affect of high interest rates. “It has also lost material export volumes recently so a sale at a reasonable price is a positive for Metair,” he said.
Quexco, founded in 1984 by its chair Howard Meyers, owns Bestolife Corporation, a producer of lubricants for oil production.
After the divestiture — which is subject to conditions, including approval from shareholders and the Turkish competition authorities — Metair will primarily be an SA vehicle component manufacturing business, with a strategic focus on being a key player in the sub-Saharan African mobility sector, which it said “has compelling macroeconomic tailwinds in the medium to long term”.
Early this month, Business Day reported that management had formulated a debt restructuring plan, which the board approved, as part of the company’s stabilisation and turnaround strategy.
It includes the proposed refinancing of its SA operations on a ring-fenced basis, rebalancing and recapitalisation of Hesto’s debt, restructuring of the Hesto balance sheet on a project finance basis and the introduction of longer-term external funding from lenders.
Metair said it had already begun making progress, having secured $38.2m in bridging loans.
The company expects to release its interim results to end-June on September 26.
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