The corporate cogs are starting to spin in the JSE’s broader industrial sector, with several deals tabled amid persistent rumours of more merger and acquisition (M&A) activity.
In recent weeks struggling industrial counters, like pipeline services specialist Rare Holdings and industrial and mining services conglomerate Eqstra, have been targeted in buyout bids — the former by controlling shareholders in the company and the latter by the acquisitive ENX.
Stellar Capital Partners (in the throes of an offer to minority shareholders in Torre Industrial) recently pitched a takeover bid for highly profitable and cash-flow-generative Amecor.
This week mining services specialist Buildmax, where investment giant Brait holds an anchor stake, received a conditional offer from an undisclosed party to acquire a controlling equity position in the loss-making company.
Buildmax reports that the conditional offer revolves around existing shareholders receiving shares in the acquiring entity. This seems to suggest the acquiring party is listed on the JSE.
The entity tilting at Buildmax must have nerves of steel as the company has performed dismally of late. In the year to end-February, Buildmax’s revenue dropped from around R1.1bn to R945m, but the headline loss widened to 84c/share (previously 78c/share).
Buildmax’s net asset value (NAV) was 123c/share at the end of February, against a share price of just 18c.
ENX and Torre may be regarded as obvious contenders to buy out Buildmax. However, both have confirmed they are not involved. Sentula Mining may be a left-field option, though it still has significant operational challenges to overcome. Buildmax, which holds a market value of around R30m, says the acquiring entity will recapitalise the company.
There are also increasingly audible market whispers that struggling building supplies specialist Distribution & Warehousing Network (Dawn) may also attract interest from industrial-sector predators. Dawn’s shares have lost more than 60% over the past 12 months, plunging from around 600c to 223c. The company boasts a tangible net asset value of 413c/share — but short-term prospects look iffy.
Dawn has now installed highly regarded industrialist Stephen Connelly (ex Hudaco) as acting CEO. In a recent trading update it advised that turnover for the first four months of financial 2017 "remains on a downward trend with marked declines evident in June and July".
Some market watchers believe Connelly’s appointment might have come too late to salvage Dawn’s medium-term growth prospects, increasing speculation that the most realistic way to extract value might be to find a buyer for the company or its operational parts.
Potential buyers could include Invicta — which still has a muscular balance sheet — or conglomerate Bidvest, which already holds 2.3m shares in Dawn (via BB Investments).