Madiba's grandson in Cenmag deal

Cape Town - A consortium of Middle Eastern and local business people has proposed taking control of Cenmag Holdings - a rather obscure electrical products manufacturer listed on the JSE's development capital market (DCM).

According to an announcement on Thursday, Aurora will acquire a 71% stake in Cenmag by buying out three major shareholders in a deal pitched at 90c per share.

This represents a considerable premium on Cenmag's last traded price of 55c on the JSE.

At the same time Cenmag will sell off its operating assets - mainly involved in the manufacture of electromagnets, the rewinding of motors and the distribution of electrical and related equipment - to Blaf Investments.

Blaf Investments comprises current Cenmag directors, including Victor Farkas who, as Finweek pointed out last week, somewhat controversially served as the company's chairperson, CEO, financial director and company secretary.

The value of the Aurora buy-in and the Cenmag disposal are both about R6m.

The sale of the operating assets looks a brilliant deal for Blaf because they showed turnover of R36m and profits of R4m in the year to end-February. As such, Blaf is buying the old Cenmag assets on a historic earnings multiple of one-and-a-half times.

The rationale for selling the assets is that the existing directors of Cenmag - who are, of course, also directors of Blaf - do not believe that the market performance of the company warrants the costs associated with maintaining a listing.

Cenmag's last audited financial statements showed a net asset value of close to R15m, which is double the value Blaf is paying for the operating.

Naturally Cenmag's minority shareholders may prefer not to quibble about the price of Cenmag's assets because the Aurora transaction could add a much-needed spark to what has been a fairly dowdy listing for the past two decades.

Not much is known about Aurora, but the company has nominated Khulubuse Zuma as the new Cenmag chairperson.

Other directors nominated to Cenmag's board include Zondwa Mandela (former SA president Nelson Mandela's grandson) and Sheshile Ngubane as well as Raja Dato Zainal Alam Shah (a Malaysian national, who serves on the International Islamic Financial Market) and Abdullah Belhoul (who hails from the United Arab Emirates).

An official release on Aurora describes the company as "young, well-capitalised and dynamic" with an intention of investing in emergent markets.

The release said Aurora would use Cenmag as a listed vehicle "through which acquisitions in strategic industries will be made".

Aurora will probably look to using Cenmag scrip to make acquisitions, considering the listed company will not be exactly awash with cash even after the sale of the operating assets.

Cenmag currently only has 9.6 million shares in issue, and has an authorised share capital of just 20 million shares.

Presumably one of the first things Aurora will do is to ask shareholders' permission to increase the authorised capital, which will mean more flexibility when it brings new assets/investments aboard as well as allow for shares-for-cash issues.

- Fin24.com