Johannesburg – Wealth and asset management company Anchor Group has become the latest company to announce its intention to delist from the JSE early next year amid a “difficult South African listed equity market”.
The group joins a long list of companies that have delisted from the JSE recently, including Afrox, Pioneer Foods, intu Properties, Peregrine, Grit Real Estate, Clover Industries, Assore, Tiso Blackstar and Torre Industries.
The group said on Friday that it planned to buy back shares from its shareholders at a price of R4.25 a share, which represented an 11 percent premium to the 30-day volume weighted average price at the time of publication of the offer, or shareholders had the option of retaining their shares in the delisted entity.
Anchor said at R4.25 per share, the value of the business was R922 million.
The group said it had committed access to more than R450m to facilitate the delisting.
Chairperson Mike Teke, who also represents major shareholder Masimong, said the proposed delisting would help to achieve the objectives of facilitating Anchor becoming 51 percent black-owned and increasing management’s stake. The new corporate structure would result in the company having three core shareholder groupings: management, Masimong and Capricorn Capital Partners, he said. None of these parties would control Anchor.
Chief executive and founder Peter Armitage said this was an exciting next step in the evolution of their group.
“We have built critical mass, with more than 15 000 clients and more than R65 billion of assets under management and administration, and we believe we will better service our clients in the long term as an unlisted entity,” Armitage said. “It was important for us that loyal shareholders were given the opportunity to retain their stake in the company and participate in its future growth,” Armitage said.
Armitage said the South African-listed equity market had been very difficult for the past few years. Since the cost of funding was now the cheapest in decades, it made sense for the company to propose buying out shareholders who wished to sell at a premium to the listed price.
“We believe the South African market, particularly in the smaller company space, is not likely to attribute high earnings multiples to companies for some time to come. This has led to a number of delistings in South Africa, including the asset management space.”
Last year, 21 firms delisted from the JSE. The number of companies listed on the JSE has almost halved from 600 in 2001 to fewer than 350 today.
Michael Treherne, a portfolio manager at Vestact, said being listed comes with a lot of commitments, in terms of cost and time.
“The implication is that being listed for a small company can be rather onerous. If you don’t need to be listed, then it is often better not to be. When Anchor first came to market, they needed to raise money for growth. Once listed, they then went on a huge buying spree – something that they couldn’t do if they were unlisted. The group has now got to the point where they are moving to a consolidation stage. It is often easier to consolidate outside of the public eye,” Treherne said.
He said the volatility of the share price might have swayed the company to delist.
“Also, with general negative sentiment around small cap companies, the share price struggles to grow. Going forward, Anchor feels that the restraints of being listed are heavier than the benefits. Obviously, management also think the shares should be worth a lot more, so they are taking this opportunity to buyout the company – at a low share price and with cheap debt,” Treherne said.
Anchor was listed on the JSE in September 2014 and in eight years has grown to be one of the biggest wealth managers in South Africa.
The group said investors who participated in its listing have earned a compound return of 24 percent a year, including dividends.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said the reasons for delisting were many and included compliance and disclosure requirements, which sometimes made it difficult for smaller companies to comply.
“It is costly, because there are several exchange-related fees and shareholder communications to pay for, and your shares could be trading at a deep value discount to its underlying value or potential value. In that case, it makes sense for a consortium of investors to buy the whole company and hold it privately with a view to unlocking value,” Nair said.
Anchor Group’s shares closed 5.06 percent higher at R4.15 on the JSE on Friday.