Bad pun. Today’s Business Day announced "PPC’s BEE plan too expensive, analysts warn". They want to flog off 15%, which is valued at R3.2bn. Analysts say that the price could deter external financiers. The article concludes that a broad-based (read – lots of shareholders, not the broad based BEE we understand) deal would be concluded and that "price was unlikely to scupper a deal (as) BEE partners tend to take a 10-year view, looking at dividends to cover paying off the loan and turning it into an unencumbered asset.”
And this brings me to a few points.
Dividend payments
The deal would be paid off through a dividend flow. Judging by the construction boom, which David Shapiro speculates will continue to at least 2015, the shares will be easily paid off in the allotted time. This dividend flow interests me – is this a normal payment method, or is it something that has recently arisen because of the BEE necessity. I’ll find out more about this (thanks for your input this morning Dave).
We met a major women’s empowerment group who had expressed an interest in a multinational client of ours. We told them that they could go overseas with a suitcase full of cash and purchase the shares on the international bourse. They told us that they didn’t have that kind of money and that the money for the shares would have to be raised by alternative means. These guys have done some serious deals – and they can’t raise cash. I don’t like this at all.
Why is PPC doing the deal?
Let’s face it, there is a construction boom and there is a shortage of cement. It is therefore unlikely that PPC will do any worse if it doesn’t do the deal. I asked Kath about this and she rightly observed that a deal is the right thing to do. PPC would be viewed as some sort of money-grabbing entity that does not particularly care about the country, it’s people or its employees – the press and the government would have a field decade with it. It’s a good PR exercise to do it, especially seeing that some of its competitors have already done their deals.
Will the usual suspects end up being shareholders?
There is no logical reason for this happening. John Gomersall, PPC CEO, has said the deal would be broad-based. Why not make it completely broad-based and leave the regulars and the sub-regulars and their deputies out of it? It would be nice to see unknowns involved in this deal. Don’t hold your breath though.