THE BOTTOM LINE
Investors may well be miffed at Howden’s delisting price
Shareholders see the proceeds of years of sacrificed dividends mustered to execute a buyout of minorities
The delisting pitch price of R44 per share to industrial services company Howden Africa’s minority shareholders is a little shy of the optimistic expectations of about R50-R55 per share.
Considering Howden’s superb profit track record and cash pile of R1.3bn (equivalent to R20 per share), the offer might be construed by impartial observers as opportunistic rather than fair.
But, in the prevailing dire economic circumstances and considering Howden's recent downbeat trading statement, the offer is likely to find some support.
No doubt Howden’s steadfast refusal to pay dividends since 2013 — despite the growing cash pile — has also probably eroded the enthusiasm of a good number of smaller shareholders.
For the record, the offer constitutes a 22.63% premium to Howden’s 30-day volume weighted average price (VWAP) of R35.88 a share — which was taken up to September 25 when the company went under cautionary.
The offer also amounts to a premium of more than 25% to Howden’s share price on September 25, and a similar premium to the 30-day VWAP up until October 23.
The bottom line is that Howden’s parent company, Colfax, is buying one of SA’s most reliable industrial assets at a very reasonable price.
Over the years, the business generated superb cash flows. The well-regarded management team ran a tight ship.
There will in the days ahead undoubtedly be some kicking and screaming from asset managers, who, due to mandates, mostly cannot remain on board an unlisted vehicle.
That’s justifiable because one way of looking at the delisting proposals is that shareholders are now seeing the proceeds of years of sacrificed dividends being mustered to execute a buyout of minorities. And that’s always going to burn.