A buyout offer by founders in Bell Equipment at a 71% market premium elevated the heavy equipment company’s stock to a 45% surge on the JSE yesterday, cementing its stronger performance in the past year, although this will come with the de-listing of the company.
The buyout offer, which comes at a value of about R5 billion for the company, will result in the Bell founding family expanding its interests in the group.
The greater control of the company will enable them to pursue a de-listing of Bell Equipment from the JSE as a strategic repositioning.
“Pursuant to the approval of a special resolution by eligible shareholders to approve the scheme and the waiver, application will be made by the company for the delisting of all of the shares from the securities exchange operated by the JSE,” said the company yesterday.
“Should the scheme become operative, IAB will, on the date on which the scheme is to be implemented, acquire all of the scheme shares from the scheme participants.”
Being holders of about 70% in Bell Equipment, IAB is offering R53 per share to minority shareholders in the company that makes and sells mining, agricultural, and construction heavy equipment.
This represents a 71% premium to the closing price of R31 per share on July 11, the last trading day prior to the scheme’s signature date.
IAB reckons that the significant premium it was offering under the scheme would afford minority shareholders in Bell Equipment an “opportunity to exit their investment” in the company at a higher offering, at a time when “there appears to be a lack of investment appetite” in small-cap stocks.
Shares in Bell Equipment recorded an uptick in value by about 45% from its Friday close to about R49.50 in morning, and afternoon trade on the JSE.
In the past six months and one year, Bell Equipment’s shares have soared by 47% and 121%, respectively.
Some analysts yesterday alleged that there may have been insider trading in the company’s shares after its shares rallied by 9% on the JSE on Friday.
However, in its announcement for the buyout scheme yesterday, Bell said the buyout offer had “not had any dealings in Bell Equipment Shares during the six-month period prior to the signature date.”
The stock eligible under the buyout represents approximately 15.05% of the company, it added.
Piet Viljoen, fund manager at MW Investment, said the buyout offer by Bell “is probably fair” as the company’s net asset value is around R55 per share.
“The stock has traded at an average discount to net asset value of 25% over the past 25 years. What’s sad is that the market is losing a domestic business jewel,” said Viljoen.
IAB said though that in order for Bell Equipment to remain competitive and to adapt and grow in an increasingly competitive industry, it has to be restructured.
This would enhance the company’s “agility and flexibility in decision-making,” adding that this was “not suited to the listed” company environment and framework.
“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,” the company said.
IAB also firmly believes 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.
The listing additionally comes “with significant costs, both quantitative and qualitative, which do not appear to be commensurate with the benefit” derived from the listing.
Bell Equipment has now constituted an independent board of directors comprised of Hendrik Roux van der Merwe; Derek Hamilton Lawrance; Rajendran Naidu; Mamokete Emily Ramathe; Ushadevi Maharaj; and Markus Geyer for purposes of evaluating the terms and conditions of the buyout offer.
BUSINESS REPORT