Another firm leaves JSE

The Anchor Group, citing a no-growth economy for companies with smaller market capitalisations, has joined a long list of companies that have decided to leave the domestic stock exchange.

It joins six other companies – including media company Tiso Blackstar, fund manager Peregrine Capital and Intu Properties – that have delisted from the JSE this year.

The wave of de-listings has raised concerns about the sustainability of the local bourse.

Anchor CEO Peter Armitage has rubbished claims that the JSE holds little value for investors. However, with a market cap of just over R900 million*, he says the company is worth more to investors outside of the listed space.

Delisting will unlock value because of the reduced regulation and greater flexibility enjoyed by unlisted entities.

The company says the costs involved – including the annual listing fees, the JSE sponsor fees, increased audit fees, higher governance costs and group accounting and reporting costs – also contributed to its decision to leave.

“We are one of 400 companies on the JSE so we don’t think it leaves a gap [in the market],” says Armitage.

If shareholders choose to stay invested in the group, they will probably have to hold their shares for at least two years, after which “the company could come up with a mechanism to facilitate trade in the share”.

Armitage says buying out shareholders is the best option for the company, considering that the local listed equity market has been “difficult” over the last few years.

Share price performance

“The price of all SA asset managers plummeted in the last few years as the local market performed poorly.

“The average price in the last 30 days has been 380c, so shareholders are being offered more than what they could see their shares for on the market. The share also got down to 280c in March.

“Shareholders who invested in Anchor on listing have received a compound 24% per annum return,” he adds

The financial services holding company announced on Friday that it would delist its shares from the JSE, seven years after its listing on the stock exchange.

It currently has R64.9 billion worth of assets under management.

In a circular to shareholders, Anchor says its share price has remained stagnant for an extended period because of modest performance and “lack of investment appetite in ‘small-cap’ stocks in South Africa”.

The group’s share price has plummeted over 70% over the last few years, from R18.15 in 2016 to R4.12 in early trading on Monday.

Shareholders are expected to vote for or against this offer in December.

Minority shareholders have suggested that the share price offer should be higher, which is inevitable, Armitage says – but “this is the price that the company can afford”.

Anchor is borrowing from the bank to buy back shares and this is the price level at which the bank is prepared to lend to it.

Rand Merchant Bank will provide a maximum of R250 million for the delisting, while the group has a facility of R450 million to facilitate the transaction.

The cost of funding is the “cheapest in decades” so it makes sense for the company to sell at a premium to its listed price, says Armitage.

This article first appeared on Moneyweb and was republished with permission.

For more news your way, download The Citizen’s app for iOS and Android.