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At African & Overseas, the 10.13m N shares are quoted at 1 000c, the 1.25m ordinaries at only 750c. Yet the ordinaries each carry 200 votes, against only one vote per ordinary share. So anyone who controls 378 000 N shares in effect controls African & Overseas, which in turn owns more than 50% of both the N shares and ordinaries issued by Rex Trueform.
And as the Shub family controls the majority of the African & Overseas N shares, it in effect controls the whole group.
Logically, the low-voting shares should trade at a small discount. If, for argument's sake, we put that at 10%, then the ordinaries should trade at about 675c. At the ruling 1 000c, the total premium to their notional value is almost R33m.
Similarly, at Rex Trueform the 27.7m N shares are quoted at 980c, the 2.9m ordinaries at 700c. Applying a similar valuation, the N shares are overvalued by an amazing R97m - though there is an element of double counting here, as A&O owns 72.6% of the ordinaries and 51.9% of the N shares.
There's no logic in this at all. Were the voting rights of the two classes of the share to be made identical, their prices would equalise. But in a normal market situation, that would entail the price of the higher-voting shares moving down and the lower-voting shares moving up, to meet a new equilibrium somewhere in between.
Here, it would seem the reverse would happen, which is ludicrous. Even more oddly, the N shares are (though not by much) more liquid than the ordinaries, and the price differential at both Rex and A&O has developed only over the past year.
Incidentally, I noticed this anomaly before the group published its results last Friday, when Marc Hasenfuss commented on them.
I have no desire to argue with Marc, and I have every admiration for how Rex transformed itself from just another struggling clothing manufacturer into a dynamic retail chain with the development of the Queenspark chain, which I understand was the concept of Pat Shub, daughter-in-law of the group's founder Bernard Shub.
But I note that same-store turnover growth was 8.2%, with 8.4% average product inflation. That suggests that same-store volume sales were actually marginally down, which is more in line with the industry trend than the commendable 147% growth in HEPS would suggest.
Tight cost control and a 13% increase in trading space made the difference.
Still, with manufacturing now contributing well under 10% of turnover, and no profits at all, I must accept that without Queenspark Rex probably wouldn't have survived, and the focused diversification it represents is a strong contrast to the more random and less successful splashing out by that other doyen of the Cape clothing industry, Seardel.
Another Monteagle tidying-up
I've written more than once about the snail's pace piecemeal rationalisation of the clutch of small dual-listed companies controlled by the Marshall family (originally from Durban, though increasingly involved in London). The announcement on Monday from Conafex, though not presented in these terms, is a further stage in the process.
Conafex, you may recall, which is listed in Johannesburg and Luxembourg, grows and trades in various foodstuffs, though not with any consistent success. The company now tells us that its size doesn't justify a listing, and in any case it no longer meets JSE main board listing requirements and doesn't expect to be able to, so it's to offer 1 300c a share cash to minorities.
It's not exactly a generous offer, as the share has been nominally quoted at 1 300c since last December, though with little if any trade.
The offer is directed at all but the major shareholders of Conafex - which latter, we are told, collectively own 95.74% of the equity. That's interesting, as according to the 2007 annual report the four biggest shareholders were Marshall Monteagle 46.49%, Barato (which appears to be a nominee company for non-executive director C Barrow) 19.65%, Maitland Nominees 13.08% and Fortis Banque (as a nominee) 5.82%.
That totals only 85.04%, so either there are other unidentified major shareholders or they have been picking up shares somehow.
But it also means that the bid is for only 73 000 shares. When the group tried to merge the much bigger and more liquid Marshalls and Monteagle, acceptances were too few for it to apply compulsory acquisition of Marshalls minorities and delist that company.
It'll be interesting to see whether it's any more successful this time.
- Fin24.com
