INCE|Connect News

Zeder harvests less from investments Published Date: 2019-10-04 | Source: Stephen Gunnion | Author: Stephen Gunnion The investment holding company says its portfolio continues to feel the impact of tough conditions in the food and related business sector. Zeder has warned of a sharp drop in first-half earnings due to continued tough conditions in the food and agricultural sector, where the bulk of its investments lie. In a trading statement, the investment holding company said recurring headline earnings per share (HEPS) for the six months to end-August would be between 60.2% and 66.3% lower than those reported a year ago, while attributable earnings per share (EPS) would be down by 3.7% to 7.3%. Its sum-of-the-parts (SOTP) valuation at the end of August was R6.22 per share, up from R5.64 in February but lower than the R6.67 reported a year ago. The SOTP is calculated using the quoted market prices for all its JSE-listed investments and internal valuations for unlisted holdings. Together with recurring HEPS, it uses the two as benchmarks to measure its performance. The group's investments include a 28.6% stake in Pioneer Foods, 29.3% of Quantum Foods and 41.1% of Kaap Agri. It has majority holdings in Capespan Group, The Logistics Group and Agrivision Africa. Pioneer's share price received a boost in July, as did Zeder's, after it confirmed a R24.4 billion buyout offer from US food and beverages giant PepsiCo. Zeder has supported the deal, which would result in R6.4 billion in return for its stake in Pioneer. Apart from weak conditions, HEPS were impacted by the upward fair value adjustment of its investment in China's Joy Wing Mau Group prior to its disposal by Capespan, which boosted earnings in the previous corresponding period. The lower decrease in attributable EPS was mainly due to the reversal of a non-headline impairment charge on its investment in Pioneer, which was recognised at the end of last year. Zeder said its interim reporting period traditionally represented the lesser half of its portfolio's annual earnings due to the input-cost cycle of many of its agricultural investments, as well as softer consumer spending. It expects to publish its interims results on 8 October. Its shares fell 0.7% to R4.62 yesterday. Key Insights for Shareholders Pioneer expects to report a slide in first-half recurring HEPS; Its food and agricultural investments are under pressure due to difficult conditions in the sector; The group's shares have been cushioned by PepsiCo's R24.4 billion bid for Pioneer Foods. Albie Cilliers tweeted: Since it's listing, Jannie Mouton achieved CAGR of 17% in Zeder using "arbitrage" strategies until 2013. A generous Hedge Fund like fee structure was used to extract massive profits to PSG until 2016 ( nearly R3 Billion, or R1-70 per Zeder share in todays money) . Follow @Stephen Gunnion

Thorts - Ignorance is bliss, or is it? Published Date: 2019-10-04 | Source: DealMakers | Author: Lydia Shadrach-Razzino and Carine Pick In terms of section 46 of the Companies Act, 71 of 2008 (Companies Act), a company may not make a proposed distribution to its shareholders unless (i) the distribution is pursuant to an existing legal obligation of the company, or a court order, or the board of that company has, by way of resolution, authorised such distribution; (ii) it reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution and; (iii) the board of the company, by resolution, has acknowledged that it has applied the solvency and liquidity test as set out in s4 of the Companies Act and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution. The purpose behind the application of s46, read with s4 of the Companies Act, is to protect creditors and/or the minority shareholders of a company. The failure by the directors of the company to comply with the provisions of s46 will result in such directors incurring liability for the unlawful distribution, to the extent set out in s77(3)(e)(vi). In order to hold directors personally liable for the unlawful distribution, s46(6) of the Companies Act provides that the director/s of a company must have (i) been present at the meeting when the unlawful distribution was approved, or participated in terms thereof and (ii) failed to vote against the unlawful distribution, despite knowing that the distribution was contrary to the provisions of the Companies Act. On the reading of the provisions of s46(6), it is clear that all the requirements must be met in order to hold the director/s accountable for their actions to pass the unlawful distribution. This is confirmed by s46(6) and s77(3)(e)(vi), which section we note is where, pursuant to a company and/or director of a company having been (or likely to be) held liable, one would apply to court for an order setting aside the decision of a director, in order for a creditor and/or minority shareholder to find relief. We note that the Companies Act expressly provides for a situation whereby the directors knowingly approved an unlawful distribution, and the liability that such directors will incur pursuant to non-compliance with the provisions of s46. However, with the influx of foreign investment and the rise of small and medium-sized enterprises in South Africa, many South African companies have taken to appointing foreign and/or local directors with limited knowledge of South African corporate governance and/or the Companies Act and, as such, it would appear that two further situations may arise from the passing of an unlawful distribution by the directors of a company that are not expressly provided for in the Companies Act, in relation to the attaching of liability to these directors. The first situation that may arise is that director/s participated in the decision to approve the distribution without knowing that the distribution was unlawful. It is clear from the wording of s46(6) of the Companies Act that there are two requirements to be met by the director/s in order to attach liability for unlawfully passing a distribution. As such, mere participation in the decision to approve a distribution is not enough to attach liability to the director/s. The director/s are required to both have participated in the decision and failed to vote against the distribution, despite knowing that the distribution was unlawful. If there is a dispute as to whether the director/s "knowingly" contravened the provisions of s46, section 1 of the Companies Act provides guidance as to what "knowingly" means in the context of s46(6)(b), which definition we note is very wide. The definition of "knowing" goes beyond actual knowledge and provides for a person that was in a position in which such...

Raubex sees signs of renewed construction activity Published Date: 2019-10-04 | Source: Stephen Gunnion | Author: Stephen Gunnion The group will report a much-improved start to its financial year thanks to work on renewable energy projects. Raubex says opportunities are starting to emerge in the moribund local construction sector - and it's well positioned to take advantage of them due to its strong balance sheet. The construction and road-building group has also flagged a rebound in first-half profit after last year's sharp decline. In a trading statement, it said earnings per share (EPS) for the six months to end-August were likely to be 70% to 90% above last year, while headline EPS would likely increase by between 60% and 80%. Strong growth at its infrastructure division offset weak conditions at its roads and earthworks and materials divisions thanks to its participation in the Renewable Energy Independent Power Producer Procurement Programme, where a number of contracts are currently in progress. It said stable conditions persisted in the affordable housing and commercial building sector. Roads and earthworks was still carrying excess capacity - although last year's right sizing initiatives had substantially curtailed losses at the division. It said it was now better positioned to manage the lower volume of work, while maintaining sufficient capacity to participate in an expected improvement in the sector. The downturn was partly due to a decline in spending on road infrastructure by the SA National Roads Agency (Sanral). The materials division had a tough six months as margins came under pressure and operating profit declined. It blamed this on community unrest, which affected a number of commercial quarry operations across the country, the completion of some material handling contracts in the mining sector and the transition to new contracts in the sector, which resulted in establishment costs and lower initial volumes. It said some of the opportunities that had started to come to the market for tender included extensive upgrades to the N2/N3 road network in KwaZulu-Natal, as well as upgrades to OR Tambo International Airport and Cape Town International Airport. The Company has maintained a strong balance sheet throughout the period and is well positioned to participate in future opportunities in the South African construction sector," Raubex said. The group's interim results are scheduled for release on 11 November. Its shares jumped 7.8% to R20.86 yesterday. Key Insights for Shareholders Raubex is having a considerably better year than last year; Earnings are expected to rebound following a sharp decline in 2018; The group says new projects are coming out to tender and it's well-placed for them. IG South Africa tweeted: Raubex expects headline earnings per share for the six month period ended 31 August 2019 to be between 60% and 80% higher than the headline earnings per share from the previous corresponding period #Jse Follow @Stephen Gunnion

Non farm payrolls out of the US could add some real impetus to the market 2019-10-03 Our daily forex view brought to you by the TreasuryONE Dealing Team 2Y treasury yields in the US remain under pressure as the call for rate cuts in October escalate. US jobless claims came out in line with expectations and did not have real impact. US equities are slightly down for the day and we will await Friday's non farm payrolls out of the US. This could add some real impetus to the market, with a poor number that could benefit the ZAR and vice versa. The ZAR opened at R15.25 on Thursday morning and rushed down to the R15.15 level in early trade. For the rest of the day it was stuck in R15.14 to R15.18 range. EURUSD also traded flat most of the day around 1.0960, making a run to the 1.10 level late afternoon even with EURO stocks under pressure. The pound made a recovery from below 1.23 to almost 1.24 and Gold also bounced to trade comfortably above $1,500. Stories you haven't read yet... Datatec turnaround gains pace The ICT company expects to report a big increase in first-half earnings as the recovery at Westcon International continues. Ingham Analytics issues a note on the healthcare sector of the JSE Ingham Analytics issues a note on the healthcare sector of the JSE. Who’s doing what this week in the South African M&A space? Weekly summary of Merger & Acquisition activity by South African companies Zeder harvests less from investments The investment holding company says its portfolio continues to feel the impact of tough conditions in the food and related business sector. Vunani warns of lower earnings The financial services group says community unrest resulted in an 80 percent decline in production at its commodities trading business. Pembury takes tough decisions to ensure sustainability Current liabilities exceed current assets but the group has put its retirement villages business up for sale as it focuses on education. Weekly corporate finance activity by SA exchange-listed companies Weekly summary of corporate finance activity by South African exchange listed companies Thorts - Ignorance is bliss, or is it? The application of s46, read with s4 of the Companies Act, is to protect minority shareholders and to hold directors personally liable for the unlawful distribution The Rand is holding on to yesterday's gains and trading at 15.2675 this morning 2019-10-03 The Rand is holding on to yesterday's gains and trading at 15.2675 this morning due to a combination of a softer Dollar and the range of...

Who’s doing what this week in the South African M&A space? Stories you haven't read yet... Thorts - Ignorance is bliss, or is it? The application of s46, read with s4 of the Companies Act, is to protect minority shareholders and to hold directors personally liable for the unlawful distribution Weekly corporate finance activity by SA exchange-listed companies Weekly summary of corporate finance activity by South African exchange listed companies Who’s doing what in the African M&A space? Weekly summary of all Merger & Acquisition activity from across Africa (excluding South Africa) Raubex sees signs of renewed construction activity The group will report a much-improved start to its financial year thanks to work on renewable energy projects. Finally, A chance to invest in the Venture Capital Market at a budget that suits you South Africa needs economic growth, and a sustainable solution is the development of the SME sector. Non farm payrolls out of the US could add some real impetus to the market 2019-10-03 The ZAR opened up at R15.25 Thursday and rushed down to the R15.15 level. For the rest of the day it was stuck in R15.14 to... Zeder harvests less from investments The investment holding company says its portfolio continues to feel the impact of tough conditions in the food and related business sector. Vunani warns of lower earnings The financial services group says community unrest resulted in an 80 percent decline in production at its commodities trading business. Pembury takes tough decisions to ensure sustainability Current liabilities exceed current assets but the group has put its retirement villages business up for sale as it focuses on education.

Finally, A chance to invest in the Venture Capital Market at a budget that suits you Published Date: 2019-10-04 | Source: INCE|Community | Author: Uprise.Africa South Africa needs economic growth, and a sustainable solution is the development of the SME sector. However, sourcing funding is one of the major stumbling blocks for SME's. Currently, in South Africa, Entrepreneurs have to look to traditional funding models like bank loans, venture capital, private equity and government grants to access the funding they need for their business. But as we all know these types of funding models are not easily accessible for start-ups. Reward and donation Crowdfunding have been extremely successful in South Africa over the past few years, helping thousands of Entrepreneurs realise their dreams. In 2015, African-based Crowdfunding platforms raised approximately $32.3 million, which indicates that Crowdfunding in Africa is in its infancy. The overall market potential in Sub-Saharan Africa is estimated at $2.5 billion by the World Bank by 2025. Equity Crowdfunding will disrupt the country's traditional funding landscape by providing an alternative method for small businesses to raise capital in the country. Equity Crowdfunding is growing globally and has seen huge success in the US and UK. The Equity Crowdfunding industry in the US is growing by 120% year-on-year, and in the UK the industry is reporting growth rates of 295% on a year-on-year basis. Equity Crowdfunding has become one of the primary ways in which people not only raise capital for their start-up businesses but also open the doors for Investors to invest in aspiring ventures. Today we want to introduce you to Uprise.Africa, an Equity Crowdfunding platform for South African businesses. The platform works with Entrepreneurs, to raise capital for their businesses and provides Investors with a new investment option. Uprise.Africa will equip Entrepreneurs with an accredited platform to raise between R3 million and R250 million in exchange for equity shares. The Uprise.Africa platform allows Investors to invest capital into South African businesses in exchange for equity shares. In order to present a unique offering to Business Owners and Investors alike, Uprise.Africa profiles exceptional businesses and assist Entrepreneurs in crafting their pitches. Through extensive vetting, legal and compliance, Uprise.Africa creates a space that is credible, transparent and trustworthy. The platform enables trust to be built between Investors and Entrepreneurs and in doing so creates a supportive business ecosystem. Who is behind selecting the new crowdfunding investment opportunities? Ince, and Uprise.Africa and Bridge Capital have combined strengths to carefully identify, select and present the most promising new investment opportunities in exciting high-growth small companies with the potential for big returns. In a landscape where most traditional investments have offered very low returns for years (bank deposits, the stock market, bonds, property, etc), we have targeted the very best of new and exciting private companies over a wide spread of commercial sectors as an alternative investment possibility. We offer you the Investor access to private equity opportunities with complete liquidity and no lock up - an entirely new channel for the individual investor to get in on the ground floor in new fast-growing companies, previously a completely closed market without an onramp for the general public. This opens the potential of large returns only previously available to private equity and venture capital institutions. Their first pick is Sun Exchange , a global solar-energy provider operation who has a differentiated and unique value proposition for the provision of solar ecosystems, now successfully rolled out and tested worldwide.

Datatec turnaround gains pace Published Date: 2019-10-04 | Source: Stephen Gunnion | Author: Stephen Gunnion The ICT company expects to report a big increase in first-half earnings as the recovery at Westcon International continues. Datatec says a reshaping of its Westcon International business is proceeding according to plan as it reduces central costs following the sale of its Westcon Americas business to SYNNEX Corporation two years ago. Combined with strong results from all its other divisions, the ICT solutions and services company expects to report a sharp increase in first half earnings. In a trading statement, the group said headline earnings per share (EPS) for the six months to end-August would be at least 186% higher than last year, while basic EPS would climb by more than 257%. Underlying EPS are expected to be between 39% and 53% up on the previous comparable period. Underlying EPS exclude impairments, the profit or loss on the sale of investments, and a number of other extraordinary costs, giving a clearer picture of a company's operational performance. Last year, Westcon International, which is 90% owned by Datatec and 10% by SYNNEX, delivered positive earnings before interest, tax, depreciation and amortisation (EBITDA) and Datatec said it expected further improvement in the current year. Logicalis, which is the biggest contributor to group profit, delivered a strong performance and has continued to grow its operations through acquisitions. In July it bought local IT services business Mars Technologies in a deal that it said would strengthen and expand its own managed services businesses. Last month, Logicalis bought a 70% interest in Cilnet, a Cisco systems integrator and managed services business in Portugal. It said the business complemented its existing Spanish operation with data centre, collaboration, networking, infrastructure and managed services capabilities, expanding its offering to the Iberian region. In addition, Logicalis Germany acquired Orange Networks, a Microsoft services business which it said advanced it to Microsoft Gold Certified Partner status and enhanced its hybrid cloud offering. Its results are scheduled for release on 17 October. Its shares fell 1.3% to R32.65 yesterday. Key Insights for Shareholders Datatec expects to report a massive increase in first-half earnings; While Logicalis continues to expand, Westcon International has continued its recovery; Datatec didn't pay a dividend last year, buying back its own shares instead. Pierre Jacobs tweeted: #DTC Datatec reports profit growth in two consecutive periods (Latest+39% - +50%) yet share basically dormant. Is this a sign of investor uncertainty ? Keith McLachlan IG South Africa tweeted: Datatec Ltd Headline earnings per share is expected to be between 2.0 and 2.5 US cents (H1 FY19: 0.7 US cents) being 1.3 to 1.8 US cents, or more than 100%, higher than H1 FY19. #Jse Follow @Stephen Gunnion

Microsoft Becomes World’s Most Valuable Company After Apple Rout. Microsoft Corp. surpassed Apple Inc. to become the world's most valuable publicly traded company. All it took was a $300 billion rout. After briefly claiming the top spot on Monday, Microsoft shares rose 0.6 percent Tuesday, pushing the company's market value to $828.1 billion at the close. That exceeded by more than $1 billion the value of Apple, which has tumbled this month on concern about iPhone unit sales. The last time Microsoft's market capitalization was bigger than Apple was in 2010, according to data compiled by Bloomberg. A recent stock market swoon has taken a toll on nearly all technology companies. But investors have punished consumer-focused companies like Apple and Amazon.com Inc. more than firms that mostly cater to businesses, like Microsoft. It's down 6.3 percent since the start of October, while Apple has lost 23 percent. Starting more than a decade ago, Microsoft fell behind Apple as computing shifted from desktop machines to mobile devices like iPhones, making Microsoft's PC dominance less relevant. Attempts to regain its footing by acquiring Nokia's handset business and releasing its own phones led to expensive writedowns. This was particularly galling for the Redmond, Washington-based company because it once kept Apple afloat with a cash infusion in the 1990s. The rise of cloud computing changed Microsoft's fortunes about five years ago. Under Chief Executive Officer Satya Nadella, the company invested heavily in data centers and other infrastructure to run applications and store data for corporate customers. And instead of trying to tie Office work productivity software to its Windows operating system, Microsoft offered it as a subscription service over the internet and on other companies' devices -- including Apple's. It also stopped making smartphone hardware, while boosting the quality of its tablet and PC designs. Microsoft is now second behind Amazon Web Services in the cloud. That's insulated Microsoft's stock from worries about declining consumer spending on devices and increased regulation of digital advertising businesses like Facebook Inc. and Alphabet Inc.'s Google. DM After briefly claiming the top spot on Monday, Microsoft shares rose 0.6 percent Tuesday, pushing the company's market value to $828.1 billion at the close. That exceeded by more than $1 billion the value of Apple, which has tumbled this month on concern about iPhone unit sales. The last time Microsoft's market capitalization was bigger than Apple was in 2010, according to data compiled by Bloomberg.A recent stock market swoon has taken a toll on nearly all technology companies. But investors have punished consumer-focused companies like Apple and Amazon.com Inc. more than firms that mostly cater to businesses, like Microsoft. It's down 6.3 percent since the start of October, while Apple has lost 23 percent.Starting more than a decade ago, Microsoft fell behind Apple as computing shifted from desktop machines to mobile devices like iPhones, making Microsoft's PC dominance less relevant. Attempts to regain its footing by acquiring Nokia's handset business and releasing its own phones led to expensive writedowns. This was particularly galling for the Redmond, Washington-based company because it once kept Apple afloat with a cash infusion in the 1990s.The rise of cloud computing changed Microsoft's fortunes about five years ago. Under Chief Executive Officer Satya Nadella, the company invested heavily in data centers and other infrastructure to run applications and store data for corporate customers.And instead of trying to tie Office work productivity software to its Windows operating system, Microsoft offered it as a subscription service over the internet and on other companies' devices -- including Apple's. It also stopped making smartphone hardware, while boosting the quality of its tablet and PC designs.Microsoft is now second behind Amazon Web Services in ...

Corporate Finance activity of the week Texton Property Fund to repurchase BEE shares Following the failure of the company's BEE SPV, to maintain the minimum share cover ratio as per the PIC Loan agreement Texton, will in terms of the PIC's Put Option, repurchase 51,858,876 BEE shares representing 13.79% of the its share capital. The amount to be paid to the PIC is not referenced off the market price per Texton share but rather is contractually to be determined as an amount equal to the PIC loan balance which equates to 12.90 rand per share. At the current share price of 4.10 rand this translates to a 215% premium to the market price. Shareholders will have to approve the repurchase. Netcare pays special dividend Netcare has declared a special dividend of 0.40 rand per share to shareholders. This is in line with the company's investment approach that if attractive investment opportunities are unavailable then excess capital will be returned to shareholders. MMI Holdings repurchases shares MMI, has since its last announcement in July 2018, repurchased a further 53,585,496 shares at a total cost of 938,06 rand million. Vunani share repurchase results The total number of shares repurchased by the company pursuant to the Odd-lot offer was 2,219 while shareholders holding 7,326 shares sold their shares to the company in the specific offer. Shares were repurchased at 2.75 rand per share. Onelogix repurchases shares Onelogix has repurchased 3,507,669 shares at 3.50 rand per share with a total value of 12,28 rand million. The shares represent 1.21% of the company's issued share capital in terms of the general authority granted by shareholders at the annual general meeting held in November 2017. Reinet Investments repurchases shares The company repurchased a 432,462 shares during the period November 20 to 23 at an average price of 205.90 rand per share for a total consideration of 89,04 rand million. The repurchases were made as part of the share buyback programme announced on November 19, 2018. Visual International looks to secure additional funding The company has advised the additional funding being sought through the specific issue of shares for cash to Robco and TLP Investments One Five Four, which was subject to a number of suspensive conditions, has lapsed. The parties are in discussion regarding the revival of these subscription agreements including other third parties. An announcement will be made in due course. South32 repurchases shares The company has, this week, repurchased a further 7,052,796 shares for A$22 million (220,38 rand million). Hammerson plc repurchases shares This week the company repurchased 1,184,957 shares at a cost of 4,97 million (87,92 rand million) as part of a share buyback programme for its ordinary shares to return realised disposal proceeds to shareholders over the next 12 months. The maximum aggregate consideration under the programme will be "300 million up to a maximum of 79,422,719 ordinary shares. Glencore repurchase shares This week the company repurchased a further 16,250,000 shares at a cost of 46,52 million (823,36 rand million) in terms of its buy-back programme. African Rainbow Minerals takes a secondary listing ARM has taken a secondary listing on A2X, as of November 29, 2018. The company will retain its primary listing on the JSE and its issued share capital will be unaffected by the listing on A2X. Greenbay Properties to trade under new name Following shareholder approval, the company name will change to Lighthouse Capital. PSG Konsult lists on foreign exchange The company listed on the Stock Exchange of Mauritius on November 27, 2018. Nine companies issued a profit warning announcement The following companies issued profit warnings this week: Orion Real Estate, Consolidated Infrastructure, Adrenna Property, Etion, Alexander Forbes, Purple Group, PSV Holdings, Rebosis Property Fund and African Phoenix Investments. ...

Bitcoin Rises After a Terrible Month, But Don’t Call It a Bottom. That's the assessment of Kenetic Capital's Jehan Chu after the largest digital token rallied on Wednesday, climbing as much as 15 percent to $4,339. It closed at $6,302 in October. Gains in Ether, Litecoin, Zcash and XRP helped propel the Bloomberg Galaxy Crypto Index to a 16 percent increase, paring this month's rout to 30 percent."What we are seeing is not yet a bottom but a short-term buying opportunity," said Chu, managing partner at Kenetic Capital, a blockchain investment and advisory company. "Until we have broader adoption of decentralized applications, it will be hard to find a firm floor."One technical indicator had suggested Bitcoin was due a short-term bounce. The cryptocurrency's relative strength index dropped to a record this month, according to Bitstamp prices that incorporate weekend trading, signaling it may have fallen too fast. Bitcoin is headed for the biggest gain since April, providing some welcome relief to battered cryptocurrency investors -- but it may be too soon to call a bottom. A consortium of investors withdrew due to “the uncertainty around current macroeconomic conditions and the potential near-term volatility across markets”. The company has challenged Viceroy to declare any trading positions they may have had in NEPI Rockcastle at the time the report was issued. The group says it will be better placed as part of a stronger, enlarged and diversified group due to liquidity constraints and required investment. The poultry group has raised its total dividend for the year by 165%, including a special dividend due to its healthy cash position.

Thorts - Impact of Companies Amendment Bill Impact of Companies Amendment Bill on related or inter-related persons. The Companies Amendment Bill 2018 was released for public comment by the Minister of Trade and Industry on 21 September 2018. One of the important changes proposed to be introduced by the Bill is the amendment to section 45 of the Companies Act No. 71 of 2008 (" Companies Act "). This amendment will have important consequences in the structuring of certain acquisitions or disposals. It is often the case that in transactions, a related or inter-related person would play either a direct or indirect role in that transaction - directly as a vendor or acquirer or indirectly as the provider of security for the payment of the purchase price or to satisfy any warranty or indemnity claim. In transactions where there is more than one vendor (and who are related or inter-related) in relation to a collection of assets which will be disposed of to an acquirer, the giving by the vendors of joint warranties or indemnities is regarded as constituting the provision of financial assistance by each vendor to the other. Joint warranties and indemnities in this context means the giving of these warranties and indemnities on a joint and several basis. Obviously s45 only applies where "financial assistance" has been provided as a first step so it is always necessary to determine whether the assistance is of a financial nature. Assistance between related or inter-related parties which is not of a financial nature is not caught by s45. While the giving of joint warranties or indemnities may be regarded by some as assistance not of a financial nature, being assistance to consummate a transaction, the net of s45 is very wide as it contemplates assistance of a "direct and indirect" nature. So our view is that the ultimate claim under a joint warranty or indemnity would be a claim sounding in money, requiring payment by a related or inter-related person to discharge the obligations which, properly understood, rightfully belong to another party. The joint and several nature of the liability means that recourse is had to the balance sheet of the related or inter-related person. Separately, it is common cause that a seller would look to mitigate its risk of non-payment if there is a substantial period of time between signature and completion. By the same token, a buyer would want security to satisfy any liability under any warranty or liability claim down the line. The most common form of security given in both instances (due to its minimal cost, and ease of implementation) is the provision of a parent company guarantee or a guarantee from another related or inter-related company. It is in this context that we consider the impact of the proposed amendment to s45 of the Companies Act. The Bill proposes to limit the net of financial assistance transactions that fall within s45 by excluding "the giving by a company of financial assistance to, or for the benefit of, its own subsidiary." The intention behind this exclusion is laudable, but its implementation is questionable. Our issues are as follows: The exclusion uses the specific language of "its own subsidiary". Section 3 of the Companies Act defines what is regarded as a subsidiary very broadly; namely a company is a subsidiary of another juristic person if that juristic person or "one or more other subsidiaries of that juristic person" directly or indirectly control the company. Does the reference to "its own subsidiary" limit this exclusion to only subsidiaries of the juristic person which are held directly by the juristic person? This is not clear. Why has the limitation been broadened to all subsidiaries whereas, it is submitted, it should only apply to wholly-owned subsidiaries that are excluded under s45? This is because it is difficult to see any mischief arising in a wholly-owned relationship but there is potential mischief in a relationship that involves outside minority ...

Who’s doing what this week in the South African M&A; space? Exchange Listed Companies Intu Properties has advised shareholders that the consortium comprising of The Peel Group, The Olayan Group and Brookfield Property Group, has decided not to make an offer for the share capital of Intu not already held given the uncertainty around the current macroeconomic conditions and the potential near-term volatility across markets. Capitec Bank advised shareholders that its 3,2 rand billion offer for Mercantile Bank has been accepted. Mercantile was offered for sale by its shareholder Caixa Genral de Depsitos, a Portuguese bank, because it is divesting from none-core operations outside of Portugal as part of its recapitalisation plan. Verimark has informed shareholders that the Van Straaten Family Trust (VFT), via a special purpose vehicle, has received a firm intention offer to acquire all the ordinary shares (29, 508,033) in Verimark other than those held by VFT, its concert party, Prime Rentals CC and any subsidiaries of Verimark. The amount payable in terms of the scheme is 1.50 rand per share, valuing the deal at 44,26 rand million. The offer represents a 50% premium to the volume weighted average price of the shares as at the date of the release of the first cautionary in October. Pepkor has decided not to pursue the acquisition of the credit books currently owned by Cencap but will instead build its own credit books. It will however purchase the insurance products provided by FGI under the brands of Abacus Insurance and Abacus Life. Pepkor will pay Wands Investments 150 rand million. Unlisted Companies Mergence , the financial services boutique group is to acquire a 51% stake in BFG International Composites (Africa) for an undisclosed sum. The deal would give BFG Africa a local BEE partner as it sought to expand its infrastructure, mining and automotive transport and architectural footprint on the Africa continent. Smith Barney Capital , a black-owned investment company is leading a consortium to acquire a majority stake in Genesis Securities, a Johannesburg-based stockbroker which it will rebranded as Khumo Securities. DealMakers is SA's M &A publication. www.dealmakers.co.za Follow @DealMakers ...back to DealMakers

Cracking results from Quantum Foods The poultry group has raised its total dividend for the year by 165%, including a special dividend due to its healthy cash position. Quantum Foods credits significant tailwinds for its egg business for a "truly exceptional" financial performance over the past year. The poultry group said the year was characterised by the impact of the highly pathogenic Avian Influenza (AI) outbreaks in SA, which resulted in a big increase in the price of eggs. While the AI outbreaks resulted in increased biosecurity and logistics costs, there was a significant reduction in the feed volumes required by Quantum's internal layer farms. Raw material costs were also lower during the year thanks to good maize and soybean meal harvests in 2017. However, it said maize prices started to increase in February following a smaller maize crop this year. Overall, it says operational costs were well managed given the additional expenses incurred following the AI outbreak. While egg volumes declined 7.4% year-on-year, prices increased by 23.7%, boosting the profitability of Quantum's egg business. Its Other Africa businesses also performed well, with Uganda experiencing a turnaround, a good performance from Mega Eggs in Zambia and a maiden profit from Mozambique. Group revenue increased by 1.7% to 4.12 rand billion, with a 1.4% increase in SA revenue and a 8.7% rise in Other Africa operations. Operating profit more than tripled to 472 rand million and headline earnings per share jumped 234% to 163.9c. It's raised its total dividend for the year by 165% to 90c, including a 49c special dividend due to its strong cash generation. The group said while egg prices are expected to decrease in the year ahead due to the cyclical nature of the business, it's in a much stronger position to navigate the expected headwinds. Improved management and operational efficiency have been assessed by the replacement of egg grading and packing equipment in its largest packing stations. It said its broiler and feed businesses had also further demonstrated their resilience through their strong contributions to profitability. The current dynamics experienced in the egg market are significantly different to what Quantum Foods experienced 12 months ago," the group said. "Sufficient layer hens have been placed in South Africa to ensure that supply will exceed demand." Its shares closed 6.9% higher at 4.65 rand. > @JSE_SENS Quantum Foods results for year 30 Sept out today. Gratefull for a positive year > > -- Hennie (@HennieLourens1) November 29, 2018 > FY19 results from #QFH Quantum Foods were 'cracking' with HEPS +234% & total dividend for year of 90 cents > > Stock looks dirt cheap with high DY (but) as my @FinancialMail article said today this is peak cycle earnings. FY19 will be a tougher year as eggs come off (profit) boil pic.twitter.com/KubSi6QPZn > > -- @smalltalkdaily (@smalltalkdaily) November 29, 2018 Follow @Stephen Gunnion

NEPI Rockcastle calls for Viceroy probe The company has challenged Viceroy to declare any trading positions they may have had in NEPI Rockcastle at the time the report was issued. NEPI Rockcastle has called for regulators including the Financial Sector Conduct Authority and overseas regulators to probe whether Viceroy Research has operated outside of market conduct and market abuse laws. That's after the activist short-seller published a report that sent shares in the Central and Eastern European property investor as much as 16% lower on Wednesday. NEPI Rockcastle says it's clear that the issuance of the report sought to "materially impact NEPI Rockcastle and its stakeholders". Hitting back at Viceroy yesterday, the company slammed the report, saying it contained material errors and built on incorrect assumptions. It said the report, which was prepared over six months with no request for information from NEPI Rockcastle made unsubstantiated claims and was grossly misleading. Viceroy has ignored or does not understand the reporting regulations that the Company is obliged to observe locally and internationally - in particular, the differences between local accounting standards and IFRS," the company said. "Viceroy's analysis of publicly available information ignores basic accounting principles." The Viceroy report, entitled Horsing around in the Stable , accused the group of fraud and manipulation of its accounts. Viceroy said its investigations had uncovered numerous inconsistencies within the group's financial reporting and "major links to an established financial fraud". It claimed the group was fundamentally overpriced when compared with peers, even without taking the inconsistencies into account. Viceroy said NEPI's merger Rockcastle last year was immediately followed by a massive write-down of subsidiary loans reflecting uncollectible debt from special-purpose vehicles. NEPI Rockcastle said the transaction was an all-share merger of two listed companies, based on a share swap ratio which reflected the fact that the market priced the shares of both companies at similar premiums to net asset value. It said NEPI shareholders benefitted from an uplift in net asset value and earnings per share immediately after the merger. The company challenged Viceroy and its associates to declare any trading positions they may have had in NEPI Rockcastle at the time the report was issued. Its shares recovered 12% yesterday to close at 110.76 rand. They're down 48% this year. > Looking at the Viceroy's claim that NEPI Rockcastle is "fundamentally overpriced" even if there are no other issues. They look at Price to Book, and Dividend Yield ratios as measures to determine whether listed real estate companies are overvalued. This is very simplistic. > > -- Garreth Elston (@Africanadian) November 29, 2018 > Think u will find that there was no Viceroy report on Aspen. However if there was... price action would have vindicated their position, regardless. Dont let emotion cloud rational objectivity here? If they are wrong about NEPI they just gave u a gr8 buy opp as they did with #CPI > > -- Craig Martin (@sharetwits) November 29, 2018 Follow @Stephen Gunnion

intu slumps after it's jilted a second time A consortium of investors withdrew due to "the uncertainty around current macroeconomic conditions and the potential near-term volatility across markets". intu properties' shares collapsed yesterday after a second proposed takeover of the group this year was abandoned due to weak fundamentals for UK retail property. Its stock sank as much as 41.5%, taking losses for the year to 52%. Last month, a consortium including the Peel Group, Saudi conglomerate The Olayan Group and Canary Wharf owner Brookfield Property Group, proposed an indicative offer of 215 pence per share to buy out minority shareholders and take intu private. The offer included a 4.6p dividend, which has since been paid. However, following a number of extensions to allow the consortium time to conduct a due diligence investigation, it said it couldn't proceed with an offer for now due to "the uncertainty around current macroeconomic conditions and the potential near-term volatility across markets". In April, Hammerson scrapped a 3.4 billion takeover of intu, saying the opportunities it saw for value creation last December had since diminished. The UK property group withdrew its recommendation that shareholders vote in favour of the deal. Whilst market sentiment towards retail and retail property remains negative, intu is confident of its commercial prospects which are underpinned by market leadership in UK regional shopping centres, clear focus on the highest quality assets and resilient operational performance in a challenging market," intu said yesterday. The company said a trading update last month illustrated how it had continued to deliver a resilient operational performance through a period that was particularly challenging for UK retailers. While it has had revise growth for the year downwards due to tenant failures, in particular House of Fraser and Coast, it said the four House of Fraser stores closing at its centres provided just 1% of its annual rent roll. While this would impact rental income and reduce vacancy costs next year, it said it provided the opportunity to re-engineer and repurpose these stores. It expects like-for-like net rental income growth of 0% to 1% next year, excluding the House of Fraser stores which are now redevelopment projects. intu said the current negative sentiment towards UK retail property had reduced its net assure value per share by around 9% in the first nine months of the year to 344p. Following the withdrawal of the consortium's possible offer, it said it intended to re-engage with major shareholders, including the Peel Group, while continuing its search for a new CEO to replace David Fischel, who is stepping down. Its shares retraced some of their losses to close 39% lower at 20.80 rand. > A 2.8 billion deal to buy shopping centre giant Intu Properties has been scrapped after the consortium of takeover suitors blamed "uncertainty around current macroeconomic conditions and the potential near-term volatility across markets". > > -- LBC Breaking (@lbcbreaking) November 29, 2018 > John Whittaker, whose consortium has just abandoned plans to buy Intu Properties, says his company, Peel Group, will remain a shareholder in the shopping centre group. > > -- Gareth Baines (@DrGABaines) November 29, 2018 > Intu Properties #INTU > Share Price 123p (-36%) > > Did they walk or did they run? Little margin of safety given their debt levels and risk to capital values. > > Reasons cited remind us we face the same challenges with our recent and future investments. The odds are against our success. pic.twitter.com/5qllXVA7Vt > > -- Dearg Doom (@MyDeargDoom) November 29, 2018 Follow @Stephen Gunnion