DealMakers - Q2 2019
by Marylou Greig
While it is human nature to look for positive signs in the recent flurry of economic activity – seen in bidding wars within the listed property space, the offer by PepsiCo to Pioneer Foods minorities, the approval from the Competition Commission of the Clover transaction and the subsequent sale by Brimstone of its stake in Clover to a consortium of BEE players – the fact remains that SA is ex-growth thanks to the inability to grow electricity production, and a country gripped by a confidence crisis. The latest announcement by ratings agency Fitch, while affirming South Africa’s credit rating at BB+ in sub-investment grade, has downgraded the outlook from stable to negative. The corporate governance failures and breaches at far too many SA-listed companies has done much to dent investor confidence, and while the current climate will see sector consolidation, large debt restructures, opportunistic acquisitions as a result of delisting, business rescue and the like, this is not the type of activity one wants to have populating the industry pages.
Total deal value by exchange-listed companies for the year to end-June was R100,7bn (including seven failed deals) from 212 deals. Excluding failed and foreign deals (offshore companies with secondary listings in SA), the deal value drops to R80bn (184 deals) compared with H1 2018 of R135bn (208 deals). Behind the scenes, general corporate finance activity reaffirms just how tough conditions are. The issue of scrip by listed corporate SA almost halved in H1 when compared with the same period in 2018; on the flip side, the value of shares repurchased tripled and as one might expect, the number of companies brought to the bourse halved during this period.
The pervasive influence of Naspers’ activity in the DealMakers tables for H1 2019 is evident, taking the top two spots in the largest deals by value with its share swap of MakeMyTrip shares for a 5.6% stake in Ctrip.com, the acquisition of a stake in Avito, and the unbundling and listing of MultiChoice on the JSE. This is set to continue into H2 as the multinational group, in an effort to reduce its unusual weighting in JSE indices, lists a new global consumer internet group, Prosus, comprising its international internet assets on Euronext Amsterdam.
BEE and private equity deal activity (page 6) maintained momentum during the first half of the year, with the acquisition by Lebashe Investment of the media, broadcasting and content businesses of Tiso Blackstar topping the table by value.
2019 marks the 20th year since DealMakers first launched, and the improvement in the dissemination of information has been profound with the internet and digital platforms changing the way deals are done. Virtual Deal Rooms have become the norm and the practise of participating in virtual-only AGMs is not too far off (page 50).
One thing DealMakers can be proud of is that, in an endeavour to remain relevant, it continues to evolve along with the Mergers and Acquisitions industry. Drawing on that all important guidance from the Oval Table, DealMakers has once again introduced a few changes to the league table criteria. While some changes are relatively minor (page 26), the one with the most impact is the re-categorisation of work carried out in the line of independent expert, due diligence and fair and reasonable opinions. These roles will now fall under the category of Transactional Support Services, along with the work previously categorised under Reporting Accountants.