Published Date: 2021-10-12 | Source: INCE|Community | Author: The Finance Ghost
Alaris has been a favourite of small cap punters. The company is interesting, referring to itself as a "leading global radio frequency technology holding group" - and having been listed on the AltX since 2008, its day has finally come for a buyout offer.
While Alaris may have a groovy business model, the share price action has been poor. Before yesterday's rally on the back of a buyout announcement, the price was flat over 5 years. This is why small caps on the JSE are falling like flies.
The SENS announcement for this transaction clearly sets out the rationale for a delisting. With the lack of liquidity scaring off institutional investors and making it difficult for other investors to realise their shares, the cost of being listed outweighs the benefit for Alaris.
Unlike the other indicative offers announced on the JSE yesterday, this is a firm intention announcement, which means the process is much further along. The price is R4.20 per share, a premium of 22.4% to the 30-day volume weighted average price (VWAP). This is typical of buyout offers on the JSE, with the premium designed to entice shareholders into accepting the offer.
The buyer is a consortium of investors that includes Tadvest Limited, an investment holding company listed in Mauritius with an unusual and interesting portfolio of assets. Tadvest already holds a 28.6% stake in Alaris.
The Alaris deal will be structured as a scheme of arrangement, which means that it has the support of the Alaris board of directors. There is also a standby offer, which kicks in if the scheme of arrangement fails. Importantly, the standby offer only takes place if the delisting of the company has been approved by shareholders.
In other words, if shareholders don't vote to take the company private, then there's no transaction here.
Shareholders can choose to retain all or part of their Alaris shares, although I must caution that holding shares in a private company often means that the next liquidity event takes place in the year two-thousand-and-never. In this case, the SENS does note an intention to seek a listing on an international exchange at a future point in time. Shareholders should note that this may never materialise, so hanging on for that day is a significant risk.
With irrevocable undertakings (promises to vote in favour of the scheme) in hand from holders of 56.3% of the shares eligible to vote, this transaction has a strong possibility of going ahead.