Photographer: Nadine Hutton/Bloomberg

Spinoffs Drive JSE Listings as Valuations Spur Sales

  • Six of this year’s JSE debuts carved out of other companies
  • Index records see bid to ‘crystalize value’: African Alliance

South Africa’s main stock exchange may witness the most new listings for at least two years in 2017, helped by a spate of spinoffs as owners look to tap a market trading near record highs.

Of the 17 debuts this year, six are carved out of other companies, most of which are publicly traded. A further four new arrivals are backed by collections of investment holdings, rather than providing a direct bet on any single business.

“It’s simply a function of trying to crystallize value with the high valuations that the companies are seeing,” said Grant Cullens, who helps oversee $1.3 billion as chief executive officer of African Alliance Asset Management in Johannesburg. “It’s better to do that when the market is up here, rather than when it’s down 200 or 300 points lower.”

South Africa’s benchmark stock index gained 0.1 percent to 57,999.60 in Johannesburg on Monday. It has clocked eight records in October, shaking off the restraints of weak economic growth and a divisive leadership contest within the ruling African National Congress. With the final quarter traditionally a busy one for new listings, the exchange expects more companies to seek to make the most of the biggest stock gains since 2013.

“If you ask me what the common theme is, if you further analyze the listings for this year, I would say it would definitely be the spinoffs,” said Patrycja Kula-Verster, business development manager in the primary markets division at JSE Ltd., operator of the bourse. 

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Listings are proving a popular alternative to tapping private equity for companies seeking funds, Kula-Verster said in an interview. It’s a step that can provide a permanent source of capital, without the defined time horizons that accompany private equity deals, while also offering scope for follow-on raisings, she said.

This year’s spinoffs that now trade on the exchange:

  • Premier Fishing & Brands Ltd., unbundled from African Equity Empowerment Investments, in March
  • Sea Harvest Group Ltd., spun off from Brimstone Investment Corp., in March
  • Master Plastics Ltd., unbundled from Astrapak Ltd., in May
  • Kaap Agri Ltd. spun off from unlisted holding company Kaap Agri Bedryf Ltd., in June
  • Steinhoff Africa Retail Ltd, unbundled from Steinhoff International Holdings NV, in September
  • Stadio Holdings, spun off from Curro Holdings Group Ltd., in October

Investment holding and special purpose acquisition company listings in 2017:

  • Long4Life Ltd., in April
  • RH Bophelo Ltd., in May
  • African Rainbow Capital Investments Ltd., in September
  • Brainworks Ltd., in October

4Sight Holdings Ltd., which also houses investments, marked the 17th listing on the exchange on Oct. 19, two days after the benchmark set its latest record high. The positive sentiment suggests this is a good time to come to market, said African Alliance’s Cullens.

“And why wouldn’t you? Because you don’t really know how much longer it’s going to last,” he said.

(Corrects number of listings so far this year in second paragraph and chart of story published Oct. 23.)
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