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ARC Investments plans rights issue
ARC Investments plans rights issue
Published Date: 2020-09-16 | Source: Stephen Gunnion | Author: Stephen Gunnion
Funds raised will be used to pay for existing and new investments and settle an outstanding fund management fee.
African Rainbow Capital (ARC) Investments plans to raise R750 million in a rights issue to fund current and prospective investments. Cash raised will also be used to settle an outstanding fund management fee.
In an announcement accompanying its annual results, the investment group started by black businessman Patrice Motsepe said the new shares would be issued at R2.75, a 5.4% discount to the 30-day weighted average price of its shares on 3 September. Motsepe's ARC Capital had already undertaken to follow its rights with respect to its 51.1% shareholding.
ARC Investments, which uses the ARC Fund as an investment vehicle, said the most significant investment in the short term would be its 25% acquisition of Sanlam's third-party asset management business.
The company reported a 2.1% increase in its intrinsic net asset value for the year to end-June to R9.54. While the growth fell short of its medium- to long-term target of 16% a year, it said this was indicative of, and aligned to the market performance due to the current economic and political environment.
Acquisitions for the period amounted to R1.98 billion, including increased investments of R738 million in Alexander Forbes, R374 million in digital bank TymeBank and R249 million into Kropz plc. Disposals totalled R335 million, leaving the intrinsic value of its portfolio at R11.14 billion at the end of June.
ARC's investments are separated into divisions that include Telecommunications, Mining, Construction and Energy, Business Process Outsourcing, Agriculture, Property and Diversified Financial Services.
About half of the ARC Fund's portfolio is invested in early stage businesses such as TymeBank, Rain, and Kropz, a plant-nutrient producer, and its Kropz Elandsfontein phosphate mine. It has a number of other investments, listed and unlisted.
The company wrote up the value of its biggest holding, Rain, to R3.11 billion after the data network operator experienced a surge in subscriber numbers during the lockdown and made progress with the roll-out of 4G. TymeBank had on boarded 1.9 million customers by the end of June, ahead of its business plan, as it signed up between 3,000 and 3,500 customers a day. However, ARC wrote down the fair value of its investment in Bluespec due to the challenging conditions faced by the motor industry.
ARC Investment's shares declined 6.4% to R2.65 yesterday, falling below the rights issue price.
African rainbow capital. The stated nav is R9.50 share trades at R2.80. Rain is biggest investment at 28%. Fantastic investment and good business during lockdown. Thyme bank at 8%, still needs big capital. Alexander Forbes and many others. Post year end sanlam asset man deal-- Wayne McCurrie (@WayneMcCurrie) September 15, 2020
What's with Stellenbosch & lofty management fees? Not sure who started it. The Moutons with PSG or the Ruperts with Reinet? But it's spread to the Jannies at ARC. Charging fees on NAV that the directors believe is 4 times greater than the market price, sets a new high water mark.-- David Shapiro (@davidshapiro61) September 15, 2020
ARC Investments (AIL) announces a R750m rights offer at R2,75 per share today.-- Delphine Govender (@Delphine_DG) September 15, 2020
Why? Using capital for current portfolio company investments; possible future acquisitions and then....wait for it....
read the highlights below.... pic.twitter.com/V3FIsoO6CT
African Rainbow Capital to massively dilute its NAV and shareholders in order to raise more capital for, basically, RAIN and one or two other capital draws. Don't forget, the larger the fund's balance sheet, the larger the ManCo fee on them.. I'd be angry if I was a shareholder.-- Keith McLachlan (@keithmclachlan) September 15, 2020
The expected % shareholder dilution can be very material though. You see it when there's a lack of irrevocables & you have to downward adjust pricing.-- Koshiek Karan (@iamkoshiek) September 15, 2020
Having executed a couple of rights issues, most tend to be "gun to the head" especially since our market LOVES rescue issuances
TymeBank has 1.9 million customers as at end-June 2020, which is "ahead of its business plan". About half these customers are actively using their accounts.-- Hilton Tarrant (@hiltontarrant) September 15, 2020
The bank is signing up between 3,000 and 3,500 customers per day.