SOMETIMES you have to marvel at the comings and goings on the JSE.
It’s not that uncommon to see a company sneak off the JSE (like the much-loved Macadams Bakery Supplies did in late 2000) only to return later in a slightly different guise. (Macadams returned to the market a few years ago as an integral part of the promising Universal Industries Corporation.)
Some companies, though, don’t leave the sweetest of memories – especially when value has been badly mauled. Sometimes prospects are so bleak that shareholders are actually glad to see the back of a particular venture – even if it means parting with only a smidgen of an original investment sum.
One such “bad flashback” company – and there’s a plethora of examples from the late 1990s listing boom – would be Intervid, which specialised in security monitoring technology.
Now believe it or not, Intervid is wending its way back to the JSE as part of I to I Technologies, which is set to be reversed into the hapless (some might say “hopeless”) Zaptronix listing.
Intervid listed in the late 1990s on the wild technology wave that swamped the JSE and washed away all semblance of sensible investing (tangible asset value measures, cash flow considerations, reasonable earnings multiples, etc).
Intervid was briefly popular with the punters – as one might imagine a counter that mixed security and technology would be in those heady times.
But Intervid’s offshore expansion – which plonked a good deal of debt onto the balance sheet – went horribly awry. Still, Venfin, then a stand-alone technology investment company controlled by the Rupert family, thought Intervid was worth rescuing, and pumped in $50m via a convertible loan.
When the loan was converted into scrip, Venfin became by far the dominant shareholder, and – probably thanks to some downright dire short-term prospects – managed, after some initial resistance from the original family shareholders, to delist the company from the JSE.
Now a number of cynics (moi included) at the time suspected that Venfin would make a mint from Intervid in years to come, having the financial muscle and patience to sit out the bad times.
Well, not quite. Now I can’t recall (or find) exactly what Intervid was worth when it delisted – but the fact that a $50m bond was converted to equity should give some kind of indication of the business’ worth back in 2004.
Certainly Intervid was worth more than R7m.
Smells like the same business
Last Friday Zaptronix reiterated proposals to acquire I to I for the princely sum of R6.6m, a transaction it envisages will be settled by the issuing of 440 million new Zaptronix shares pitched at 1.5c/share.
Zaptronix indicated that the acquisition price was based on tangible net asset value, comprising movable assets of R900 000 with the remaining amount relating to receivables, inventory and annuity-based contracts.
Can this really be what’s left of Intervid? Zaptronix’s Stock Exchange News Service (Sens) announcement indicated that I to I provided state-of-the-art off-site monitoring solutions to customers in the retail, property management and financial sectors. Certainly smells like the same business...
I contacted former Venfin CFO (and now senior executive at Remgro) Neville Williams to see if I could fill in the missing pieces around Intervid and its morphing into I to I.
Williams explained that about a year after Intervid became a wholly-owned subsidiary of Venfin (2004) the company was merged with Commsco (Venfin’s inhouse IT services company at that stage) to form I to I Technologies.
Williams said I to I was sold in December 2008 to the Gandalf Trust (headed by rescue wizard and Tolkien enthusiast Karl Gribnitz). Indeed it is the very Gandalf – which is also a major shareholder in Zaptronix – that is the vendor of I and I.
I’m not sure of the operational status of I and I when Gandalf stepped in, but I somehow don’t think Venfin was exactly letting go a gem.
Williams confirmed my suspicions that I to I was sold by Venfin because of underperformance.
Now most people know that companies in the Rupert family realm are not prone to giving up too easily on their difficult investments. I can cite a few examples like Rainbow Chickens, Trans Hex, Nampak, Dimension Data, Dorbyl and Sage – situations were lesser corporate entities might have been spooked.
For Venfin to let go, one has to presume things were really quite dreadful at I to I.
Naturally this brings us back to Zaptronix, which – judging by its recent operating performances – is a tad light on cash-generating operating assets.
About 18 months have passed since Venfin sold I to I, and I – sceptical as I am – can’t be so prejudiced as to discount the chances that Gandalf has worked some magic at the company.
But the reality is that I to I will need to produce some enormous numbers at bottom line to justify a transaction that more than doubles the number of Zaptronix shares in issue.