Three companies set to leave the JSE
The Johannesburg Stock Exchange (JSE) is set to lose three companies—Sasfin, Bell Equipment, and TeleMasters—as its delisting trend continues.
The largest stock exchange in Africa has been hit hard with delistings over the past few years as companies search for cheaper finance and looser regulations elsewhere. This has left South African investors with a shrinking pool of stocks.
PSG Wealth Chief Investment Officer Adriaan Pask said the number of listings on the JSE has declined by more than half since the 1990s.
In the 1990s, the JSE had approximately 850 listed companies. This number dropped to around 400 by 2012 and has now fallen below 300.
“This decline is attributed to several factors such as significant costs associated with compliance, reporting, legal and administrative requirements,” Pask said.
Being a listed entity comes with obligations that exert short-term pressure on board members and businesses to perform well consistently.
Equities are generally a long-term investment, and this short-term pressure can disincentivise businesses.
“The reality is that while the JSE’s world-class regulatory environment ensures investor safety, overregulation can make the market unattractive to businesses due to rigid and significant reporting requirements,” Pask said.
Market conditions have also not been favourable. “The JSE has been struggling, and it’s not the most obvious place for businesses to seek funding.”
This environment has resulted in popular South African companies being acquired by foreign investors and delisting.
Examples include Heineken acquiring Distell and Pepsi acquiring Pioneer. These acquisitions occurred because foreign investors saw value in these companies and acquired them at favourable prices.
The other reality is that the declining number of listings on the JSE means fewer investment opportunities, leading investors to look abroad for alternatives.
Many thought the tide had turned this year when several companies announced their plans to list. This includes WeBuyCars, Cilo Cybin, and Rainbow Chicken.
However, in the past few weeks, three JSE-listed companies announced their plans to exit the bourse, showing that the delisting trend remains a concern.
Below is an overview of these three companies and why they are delisting from the JSE.
Sasfin
Financial services company Sasfin is the latest to announce its planned departure from the bourse.
In a SENS announcement on 15 July 2024, the company made an offer to minority shareholders that values Sasfin at R969 million. It plans to delist from the JSE as it refocuses its business.
The company offered minority shareholders R30 a share, a 65% premium to the 30-day volume-weighted average.
Sasfin’s two biggest shareholders – Unitas Enterprises and Wiphold – are funding the offer.
They will each subscribe for 7.5% of shares in Sasfin Wealth, whose management team is also buying into the business. Sasfin Wealth has an implied valuation of R500 million.
“Our aim is to simplify the group and back our core businesses,” CEO Michael Sassoon said.
“The backing of our major shareholders and management team will assist in rolling out our future strategy for the business.”
Sasfin has been reorganising its structure, selling its capital-equipment and commercial-property finance businesses to African Bank in February.
The financial services group also exited its specialised lending and foreign-exchange businesses.
This comes after Sasfin got into hot water last year when it failed to submit its annual financial statements within the JSE’s deadline and faced possible suspension or removal.
It also recently faced a R4.87 billion damages claim brought by the South African Revenue Service (SARS) related to allegations of money laundering and bribery by former employees and clients of its banking business.
“The claim, which we emphatically reject, will involve a protracted trial action, and the matter is only likely to conclude in several years’ time,” Sasfin CEO Michael Sassoon said at the time.
SARS’ civil claim comes after the news organization Al Jazeera reported in 2023 that Sasfin Bank staff, as well as others from South Africa’s Standard Bank and Absa, were involved in laundering money in exchange for bribes from an international gold smuggling syndicate with strong ties to Zimbabwe.
The case goes back to 2014 when a criminal syndicate colluded with former employees of Sasfin Bank who were operating outside of their scope and authority of employment.
Sasfin was listed on the JSE in 1987 and currently has a market cap of R878.28 million.
Bell Equipment
South Africa’s only major designer, manufacturer and distributor of heavy equipment, Bell Equipment, recently announced its plans to exit the bourse after a buyout offer from its founding family.
In a SENS announcement released on 15 July 2024, Bell informed shareholders that it and IAB entered into an implementation agreement.
In terms of this agreement, IAB agreed to express a firm intention to make an offer to acquire all of the issued ordinary shares in the company from shareholders.
Shareholders that can participate in the offer represent around 15.05% of Bell’s shares.
They will be offered R53 cash per share, a 71% premium to the closing price of Bell shares and an 82.3% premium to the 30-day volume-weighted average traded price on the JSE of R31 on 11 July.
IAB is an investment holding company owned by representatives of the founding family and affiliates of Bell Equipment.
If the offer is completed, IAB intends to delist Bell Equipment from the JSE.
“IAB believes that for the company to remain competitive and to adapt and grow in an increasingly competitive industry, the company should be restructured to better position itself in the global arena and to enhance its agility and flexibility in decision making, which is not suited to the listed environment,” the company explained.
“In the unlisted environment, the board and management of the company will be able to take a longer-term view in its approach to managing the company and its business undertakings, particularly where certain strategic decisions are necessary which are unlikely to yield positive short-term financial results.”
“IAB is of the view that Bell Equipment derives limited value from its listing, as the primary benefits of a listing, including share liquidity and the ability to raise capital, are constrained.”
It said the listing comes with significant costs, both quantitative and qualitative, which do not appear to be commensurate with the benefits derived from it.
Bell Equipment has been listed on the JSE since 2001 and is currently trading with a market cap of R4.78 billion.
TeleMasters
TeleMasters Holdings said earlier this month that its two largest shareholders have been approached by a company interested in acquiring their shares, subject to certain conditions.
In a notice to shareholders released on Friday, 5 July 2024, TeleMasters stated that discussions regarding the potential takeover are ongoing.
The company noted that the acquiring entity must complete various regulatory processes before making a formal offer.
“However, the interested party must engage with advisors and funders, and thus, the maintenance of information confidentiality cannot be controlled by TeleMasters,” the company said.
Should TeleMasters make and accept a formal offer, it will result in a change of control and a mandatory offer on similar terms to the remaining shareholders.
The acquiring company is in the initial stages of issuing an expression of interest for the acquisition.
TeleMasters indicated that if the deal is finalised, the acquiring company would need shareholder and regulatory approvals.
“Accordingly, shareholders are advised to exercise caution while dealing in their securities until a further announcement is made,” TeleMasters said.
Founded in South Africa in 2001 and listed on the JSE in March 2007, TeleMasters is among the six most valuable listed telecom companies in the country. Its current market cap is R63.23 million, up from R46 million in January 2024.
TeleMasters has over 57 million shares in circulation and has traded profitably every year since its inception.
Comments