Cape Town - Retail tycoon Christo Wiese - through the corporate guise of Titan Financial Services - is now guaranteed to snap up a large chunk of resurgent fluorspar miner, Sallies, after the terms of a rights issue were amended.
An announcement on Thursday morning disclosed that Sallies, after having considered the growth options available, had opted to increase its rights offer from R47m to R65m.
Last week Finweek disclosed ('Wiese Sallies Forth') that Wiese had emerged as the underwriter for the initial R47m rights offer by fluorspar producer Sallies.
Sallies had earlier announced an underwriting agreement with Titan for the full underwriting of a rights issue entailing subscription for an additional 103m ordinary shares in Sallies at 46c/share. The revised terms sees 141m shares issued at 46c/share.
Finweek reported that a search on www.legalcity.net showed the directors of Titan Financial Services as Christoffel Hendrik Wiese and Isak Hendrik Johannes Visagie. Titan has long been Wiese's corporate guise and he's shown as a director of Titan Nominees, Titan Share Dealers and Titan Global Investments.
New terms
The new terms of the rights offer sees FRM Strategies, the turnaround specialists previously involved at Sallies, forced into a deal with Wiese. FRM comprises three Sallies directors: Peter Flack, Alastair Moffat and Lindsay Robertson - all well known businessmen in their own rights.
With Sallies shares trading at around 60c on the JSE it seemed unlikely that current shareholders would let their rights to new shares at 46c/share lapse. This meant Wiese's Titan may not have picked up too many Sallies shares as the underwriter.
No doubt Wiese probably insisted that Titan receive sufficient shares for the risks assumed in offering its underwriting services. It is not easy for small cap companies like Sallies to woo underwriters at the best of times.
Basically FRM holds options to acquire approximately 39m new shares in Sallies (including 22m options relating to one Sallies share to be exercised by mid-August).
This means that if Wiese (via Titan) does not acquire sufficient quantities of the 141m Sallies shares pitched in the rights offer, FRM will cede the difference between the actual number of shares acquired in the rights offer and the 141m million Sallies shares. These options will be offered to Wiese up to a maximum of 22m Sallies shares by FRM ceding its own rights to share options. This cession will take place at a price equal to 46c per Sallies share less the strike price of the relevant options to FRM (between 20c/share and 22c/share).
Blow for hard working trio
The ceding agreement must be a blow for the hard working trio of Flack, Moffat and Robertson - who endured a tough turnaround at Sallies over the last few years.
It's clear that FRM had little choice but to agree to cede their options for the good of Sallies. The best they can hope for now is that Sallies takes off strongly in the next few years in order to cash in on their remaining options.
Wiese also receives a bigger consideration for underwriting the rights offer with Sallies agreement to pay Titan 2,5% of the funds raised now amounting to R1.6m (previously R1.2m).
Sallies, which has enjoyed strong market support since terminating its onerous contract with US-based Honeywell, will use the rights issue's proceeds to fund its recently announced acquisition of Buffalo Fluorspar and also reduce debt. The latest unconfirmed rumours suggest that Sallies has been approached by Toyota, who use fluorspar in the manufacturing of their hybrid vehicles.
Good news for shareholders
The participation of Wiese in the rights offer should be interpreted as good news for shareholders, with the retail tycoon previously showing good judgement in his investment forays.
Wiese, traditionally associated with the retail sector, has been an astute - albeit low-key - investor in a number of listed small cap companies over the past few years. While best remembered for his forays into banking groups Boland Bank and BoE, Wiese has over the years also shown a penchant for diamond mining companies, most notably Ocean Diamond Mining Holdings.
Wiese is also a major shareholder in industrial/agricultural supplies group Invicta and a strategic investor in unlisted wine and brandy maker KWV. Wiese, according to unconfirmed speculation, is also a significant shareholder in vehicle tracking technology group Digicore.