The plan by IA Bell, the Bell family holding company and Bell Equipment’s largest shareholder, to offer to acquire all the shares it does not yet own in the JSE-listed company appears to be a futile exercise at the offer price of R10 per share. . .
This follows two institutional investors who own and / or control about 8.6% of Bell Equipment’s issued share capital indicating that they will vote against the offer.
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A third institutional investor declined to indicate how it will vote.
In a joint announcement last month, Bell Equipment and IA Bell made the anticipated announcement that IA Bell has now given notice of its firm intention to make the offer through a scheme agreement, but IA Bell stuck to its price of Initial indicative offer of R10 per year. share despite previous criticism from minority shareholders that this significantly undervalued the company.
Bell Equipment had a net asset value per share of R37.79 at the end of June 2021, its most recent financial results.
The company’s shares rose 4.84% on Friday to close at R13, 30% higher than the offer price.
This followed Bell Equipment releasing a trade statement on Friday in which it said the company expects to report earnings per share and earnings per share of at least 300 cents for the year through the end of December.
This is a 367 cents per share increase in earnings per share and a 331 cents per share improvement in overall earnings per share compared to the loss per share of 67 cents and the overall loss per share of 31 cents for the year. previous.
Bell Equipment attributed the expected increase in earnings primarily to stronger market conditions, which has had a positive impact on production and sales performance.
The business update did not mention the outline of the deal, which if successful, will result in the exclusion of Bell Equipment from the JSE.
Attempts to obtain comment from Bell Equipment were unsuccessful.
Minority Shareholder Comments
Marlo Scholtz, head of equity research and portfolio manager at Sanlam Investments, confirmed that Sanlam is a minority shareholder in Bell Equipment with approximately 3% of the company’s issued shares and will not endorse the offering.
“We don’t think the R10 is a fair price. It is 32.2% off the market price on the day the R10 offer was announced, below the R38 NAV and below our intrinsic value estimate.
“We are closely monitoring the matter and analyzing the developments at Bell Equipment and will make a decision that is in the best interest of the stakeholders,” he said.
Varshan Maharaj, a portfolio manager at Allan Gray, confirmed that his clients own 5.6% of Bell Equipment’s issued shares and expressed similar sentiments to Sanlam about the offering price of R10 per share.
“We do not support the resolution presented as the offer falls well below our assessment of the intrinsic value of the business,” he said.
A third institutional investor, Ninety One, declined to answer specific questions about its stake in Bell Equipment.
“Ninety One has confirmed that they will not reveal how they will vote, but reiterate that they are committed to seeking the best outcome for their investors,” said a representative of the firm’s external communications company.
Carson Mitchell, a managing member of Shipyard Capital Management LLC, told Moneyweb last month that the Bell family’s R10 offer “is not serious,” adding that IA Bell does not have the votes to approve a settlement scheme and did not get commitments. of any of the three institutional shareholders – Sanlam, Allan Gray and Ninety One – and the offer price is below the market price.
“Putting this offer on the market in the middle of a trading session was reckless and I would not be surprised to see an action against Bell’s board of directors for allowing it,” he said.
Mitchell previously indicated that Shipyard Capital Management LLC controlled 1.2 million shares of Bell Equipment.
The planned offering to Bell Equipment minority shareholders follows IA Bell’s acquisition of 30 million Bell Equipment shares at R10 per share from John Deere Construction & Forestry Company effective September 28, 2021.
The completion of the John Deere transaction means that IA Bell now owns 70.1% of Bell Equipment’s issued share capital.
In terms of the arrangement scheme, only the owners of 29.45% of the shares not yet owned by IA Bell or certain shareholders who are related to or known to the founders of Bell Equipment will be able to vote on the proposed scheme.
An analyst who did not want to be named said that only the roughly 30 million shares that are not owned by IA Bell will be able to vote on the scheme of the deal.
“Since a 25% vote is enough to kill him, it would appear that even non-institutional shareholders can block the scheme,” he said.
The analyst added that if this offer fails or is withdrawn, IA Bell will not be able to make another offer for the next 12 months in terms of the provisions of the Corporations Law.
Expert opinion not yet known
Bell Equipment said last month that the independent board appointed to consider IA Bell’s offer had appointed BDO Corporate Finance as the independent expert to express an opinion on whether consideration of the scheme is fair and reasonable to eligible shareholders, to be provided with the circular to the shareholders. .
The circular providing details on the outline of the agreement and BDO Corporate Finance’s fair and reasonable opinion report has yet to be published or distributed to Bell Equipment shareholders.
All conditions of the arrangement scheme must be met, except where exemption or adjustment is allowed, by March 1, 2022.
The exclusion of Bell Equipment, subject to compliance with all conditions of the scheme, including approval of the scheme by eligible shareholders, will take place on March 15, 2022.