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Johannesburg - A major overseas investment in South Africa was the main talking point on the JSE on Friday, as Illovo’s share price surged the most since 1994 on the news that Associated British Foods increased its offer to buy the stake it doesn’t already own in the sugar producer for more than R5.5bn.
READ: AB Foods to buy remaining R5.6bn Illovo stake
By mid-morning Illovo’s share price was already 15.48% higher at R23.72 and the share was one of the busiest on the JSE, with 1.2 million shares being traded for more than R30m.
Besides the jump in Illovo’s share price, there was not much else going on at the JSE with the major indices marginally lower by mid-morning on Friday.
The news about AB Foods was also good for the rand and the currency strenghthened to almost R15.00 to the dollar before losing some momentum. By mid-morning it was again trading at R15.13/dollar.
AB Foods, which already owns 51% of Mount Edgecombe, Illovo’s holding company, offered R25 a share to minority shareholders, valuing the company at R11.5bn. The new offer was almost R5 higher than Thursday’s closing price of R20.54, and also 25% higher than the R20 offered in February by the London-based company.
A buyout of Illovo will bolster AB Foods’ portfolio of sugar businesses, which include operations in the UK, Spain and China. Over the past two years, the company’s profits from the commodity have dwindled as prices fell.
Illovo’s share price gained 29.1% over the past 90 days since the news of a possible offer became known.
There was however no other excitement on the JSE and at mid-morning the All-share index was only 0.03% lower at 51 130 points. At that stage it was more than 2.5% lower for the week, as the local market is desperately looking for new indicators amid concerns about the economy’s poor growth prospects.
The index closed in the red the two previous two days after pessimism about the economy killed promising rallies earlier in the day.
The Top 40 index was at that stage unchanged at 45 024 points, after giving up 3% over the past seven days.
The star performer was the Financial index, which gained 0.56% due to the rand's temporary rally. The higher oil price supported other commodity prices and the currencies of commodity producers such as the rand and the Australian dollar.
It was however not enough to support the Resources index, which lost 0.67%, and the Gold index, which traded 2.56% softer. The Industrial index with all the big dual-listed shares, which are all regarded as rand hedges, lost 0.04%.
Oil prices rose on Friday after firm economic indicators from the US and Germany implied support for fuel demand and were set for an increase of 5% for the past week. It will be the seventh in eight weeks that crude oil trades higher, as US output continues to drop before a meeting between international suppliers to discuss a production freeze. Brent traded 3% higher at $40.38 per barrel.
Commodity share prices showed very little response and Sasol [JSE:SOL] traded 0.32% lower at R418.61. BHP Billiton [JSE:BIL], another major oil producer, was only 0.03% softer at R156.30.
Anglo American [JSE:AGL] lost 1.86% to R107.89 and Glencore [JSE:GLN] was 1.40% lower on R28.31. In the gold sector AngloGold Ashanti [JSE:ANG] was 3.49% down at R212.33 and DRDGold [JSE:DRD] lost 3.84% to R6.02. Sibanye [JSE:SGL], which has averted a strike by union Amcu at its mines, was 3.64% softer at R55.52.
Imperial Holdings [JSE:IPL] was also under the spotlight after its CEO Mark Lamberti announced the company is planning an international expansion of its drones to pharmaceuticals-delivery business to capitalise on growth opportunities and offset the impact of a weak rand.
The company’s logistics division, which has operations ranging from the distribution of prescription drugs in Africa to inventory-taking drones in Europe, will be the main growth driver of the business. It will become an increasingly global business.
By mid-morning on Friday the share price was 1.24% higher at R143.14, but in earlier trade it spiked by more than 7% to R151.00. Imperial gained 8.75% over the past 30 days.
SABMiller [JSE:SAB] was 0.77% lower at R899.04 and Naspers [JSE:NPN] gave up 0.24% to trade at R2 084.11.
