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The Finance Ghost: The lowdown on corporate deals — before, during and after the ink dries

The Finance Ghost: The lowdown on corporate deals — before, during and after the ink dries
The Finance Ghost
By The Finance Ghost
18 May 2025
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Things have ramped up after the April break, with a number of companies showing their hand in terms of plans for the rest of this year. Aside from numerous earnings updates this week, there were various corporate actions and deal-related updates on the local market. - think Afrimat, Barloworld, Assura, MAS, Blue Label Telecoms and Tiger Brands. 

In some cases, the updates reflect deals that are still at an early stage, where nothing is certain yet. Others are in process and could easily still fail. And finally, there were updates that show us what the aftermath of deals can look like.

Buckle up!

Afrimat: risky deals need time


The Afrimat share price has been under a lot of pressure this year. The market is nervous about a number of risks, including the impact of global trade volatility on iron ore prices. Locally, there are legitimate concerns about the long-term viability of ArcelorMittal, a key customer of Afrimat. On top of this, Afrimat recently acquired the struggling Lafarge assets in South Africa, and that cement business is still suffering heavy losses.

Down 23% year-to-date, the share price reflects a risk-off approach by the market that has been compounded by the specific risks that Afrimat added to its business through the Lafarge deal. Not only did it acquire a marginal asset, but it did it in such a way that the debt:equity ratio jumped substantially.

The layering of risks has manifested as a terrible year for HEPS (headline earnings per share), down from 567.3 cents to just 72.3 cents for the year ended February 2025. Although the troubles in the iron ore business were a far greater contributor to this drop than the Lafarge assets, it does feel as though Afrimat is facing a perfect storm at the moment.

It needs time and patience from the market to work through this and hopefully make a success of the largest acquisition in its corporate history. Will the market be willing to display that patience and will the iron ore price play ball? Only time will tell.

Barloworld: that offer looks juicier by the day


Barloworld is subject to a take-private offer that is struggling to achieve sufficient acceptances for the deal to go ahead. Although those making the offer haven’t been explicit on the minimum number of acceptances that would get them across the line to go ahead with the deal (you can safely ignore the legal percentage of 90% – they will be fine with something a lot lower), we do know that the current acceptance level of below 50% definitely isn’t enough. 

Will the latest trading statement at Barloworld help lift that percentage? I think it might, with Barloworld’s HEPS down by between 18.9% and 22.7% for the six months to March 2025. They blame the business in Russia for this drop, where sanctions severely affected trading conditions.

I don’t have shares in Barloworld. If I did, I would accept the offer on the table. Cyclical businesses can head in the wrong direction for years and the offer price of R120/share isn’t exactly a cheeky bid, despite what some activist shareholders would have you believe.

Potential acquisitions in the property sector


There are two deals in the property sector that are worth looking at, both of which relate to funds that are listed on the JSE but have exposure to other regions. 

The first is Assura, a recent addition to the JSE that looks set to disappear soon after it arrived. A bidding war has erupted here, with private equity players on one side (KKR and Stonepeak) and a fellow recent JSE listing, Primary Health Properties, on the other. As you would expect, the private equity offer is an all-cash deal. It’s also not a surprise that the Primary Health Properties deal is a part-cash, part-share merger of the companies – one that is filled with promises of post-deal synergies.

The initial bid from Primary Health Properties was woefully inadequate, leading the board to support the KKR / Stonepeak offer. But now things have gotten spicier, with Primary Health Properties upping the ante by increasing both the cash component of the offer as well as the overall implied price per Assura share. This puts their offer at a premium of 4.7% to what KKR and Stonepeak are offering, with the board of Assura having indicated that it will consider the offer with its advisers and respond accordingly. Although there are obviously no guarantees of what happens here, it’s very debatable whether a premium of 4.7% is sufficient compensation for the sizable risks of a part-share offer vs an all-cash offer.

The second potential deal in the property sector involves JSE-listed fund MAS and comes with an especially strange structure. MAS is an Eastern European property fund that has been struggling with getting its balance sheet ready for major refinancing events. It has a joint venture with Prime Kapital Holdings, called PKM Development, in which MAS holds 40%. For added complication, PKM Development in turn counts a 21.8% stake in MAS as one of its assets. This is the entity that has now put in an offer to the MAS board to buy all the remaining shares, with MAS confirming that it had no input into the letter!

Confusing? Yes — it sounds like a circular reference error in Excel! It also feels unlikely that the deal will go ahead. The cash portion is just €40-million (R806-million), which is insignificant in the context of the MAS market cap (even after adjusting for the piece that PKM already owns). For the deal to work, shareholders would have to be willing to accept a deal that is mostly a share-for-share swap with only a modest cash underpin. It gets even more complicated, as the shares on offer are redeemable preference shares that would then be inward listed on the JSE or the Cape Town Stock Exchange. Once you consider that the offer appears to imply a discount to the current traded value per MAS share, it sounds like a poor outcome for shareholders, especially as unusual instruments struggle to achieve much liquidity on the local market. Why would anyone swap ordinary shares for preferred shares at anything less than a vast premium?

And that’s not all…


Details are thin at the moment, but Blue Label Telecoms is considering a separate listing of Cell C. This would be quite a step forward for the group and would hopefully reduce the immense financial complexity in the structure. Blue Label has been a strong performer for recent punters who were either willing to decipher the financial structure or at least ride the momentum. More details of this potential listing will no doubt emerge in coming months.

We end off with a nod to Tiger Brands, with the company having navigated a difficult social-economic situation around the Langeberg & Ashton Foods business. It is disposing of the business for nominal value to a consortium of interested parties in the region, while committing other funds for various purposes in the business. There will also be a supply agreement in place for canned fruits. Although Tiger Brands is a for-profit company and technically doesn’t owe anything to the small town and the surrounding area, it’s great to see them acting as a good corporate citizen in this case. DM

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