THE BOTTOM LINE
Something wrong about this crafty move to delist from JSE
Howden has not paid a dividend since 2013 despite its cash pile growing – at last count – to over R1.3bn
One can’t pretend to be surprised that cash-hoarding industrial services business Howden Africa is considering delisting from the JSE.
There was something disturbingly defiant in the company not paying a dividend since 2013 despite its cash pile growing – at last count – to over R1.3bn.
This week Howden – which is 55% controlled by US industrial giant Colfax – said it would consider pursuing a delisting via a share buy-back exercise.
That’s a crafty move, coming not long after a resilient Howden finally showed some fallibility in these trying economic conditions. No indicative price was offered – but judging from the stubbornness around dividends it seems unlikely a share buy-back will be executed at a huge premium price to the market price.
What’s more, the Howden share price remained resigned after the delisting announcement. Officially, Howden cited the share’s relative illiquidity and analyst coverage as the prime reasons for seeking a delisting.
Interestingly, the group also argued it would be easier to complete a black economic empowerment transaction in an unlisted environment.
The level of resistance to the delisting proposal will be interesting to gauge. Frustrated minority shareholders may have already endured too much, and may well be content to just capitulate.
But it’s worth noting that at the ruling share price Howden carries a market value of roughly R2.3bn – of which 57% is represented in free cash. In other words, Howden has enough cash sloshing around its balance sheet to take out all minorities in the share buy-back exercise. It just seems wrong for a good quality company to want to shuffle off in this manner.