For shareholders it is the end of a bumpy ride and possibly a bit of light at the end of the tunnel.
The offer was announced late on Tuesday. JD Group shareholders will receive one Steinhoff share for every 1.9 shares held in JD Group.
Steinhoff trumpets that the offer is the equivalent to an offer price of R27.77 per JD Group share at Steinhoff’s five-day volume weighted average price (“VWAP”) of R52.77 on 17 March 2014, which represents a 38.1% premium to JD Group’s five-day VWAP of R20.11 on this date.
Steinhoff offered to buy up to 98% of JD Group, excluding treasury shares. It currently owns 56.8% of the issued JD Group shares (excluding treasury shares).
Shareholders will however be quick to counter that JD Group has in fact lost 33% over the last year, a poor return considering that Steinhoff has doubled over the same period of time as the JSE industrial index has boomed.
JD Group, which owns household brands including Joshua Doore and Hi-Fi Corporation, has found itself struggling to cope with rising bad debt through its consumer finance operations. When the company reported interim results in February 2014, it indicated that it had raised its impairment to R1.6 billion.
At the time, the board reminded shareholders that Steinhoff had agreed to underwrite a rights issue in the magnitude of between R1.3 billion and R1.5 billion.
It was also pointed out that David Sussman, the Chief Executive Officer of JD Group, was on “compassionate leave for an indefinite period” while Bennie van Rooy, the Chief Executive Officer of JD Consumer Finance, resigned with immediate effect on February 19 2014.
Management at JD Group has been the target of much criticism from shareholders including shareholder activist Theo Botha. Botha commented on Twitter:
Botha also criticised the fact that JD Group had refused to release the minutes of the November 2013 Annual General Meeting AGM. This was critical period for JD Group as investors were wary of poor disclosure around lending practices within the consumer finance divisions.
For shareholders in JD Group, it will bring to an end a painful couple of years on the bourse. However as previously indicated in Business, analysts believe there is probably more upside in the Steinhoff share price than water-torture hanging on at JD Group.