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THE proposed buyout of technology conglomerate Dimension Data Holdings [JSE:DDT] by NTT of Japan certainly came out of the blue.
No rumours, no cautionary - only the slightest firming of the Didata share price since around mid-April offering a faintest of clues to a possible deal. And the way most of my caustic cohorts consistently dismissed the merits of investing in Didata, I am rather stunned that such a major organisation came calling.
What's probably more intriguing is the premium NTT is prepared to pay over the average market price for the last three months. If anything (what with several small tech firms listed on the JSE going belly-up) I reckon investors were on the whole quite bearish on Didata – even though the company has tweaked its trading margins rather encouragingly of late and presented a reinforced balance sheet.
The fact that Didata's share price pushed past NTT's inferred buyout price of 1 392 cents per share (based on an offer price of 120 pence at Thursday's exchange rate) might raise some eyebrows.
While it would be tempting to speculate that the movement in Didata's share price to as high as 1 417c post the NTT announcement suggests a rival bidder could emerge, it might be more reasonable to put this trading down to a few punters desperately covering short positions.
For those investors (ahem) ruing an aversion to Didata there was, in early trading on Thursday, the chance for a quick flit into the JSE's other tech conglomerate, Datatec [JSE:DTC]. Datatec, on Thursday, was up over 5% in sympathy with Didata's all-of-a sardine revaluation.
My old colleague Shaun Harris reckons the Didata buyout - and delisting - really signals an end of an era on the JSE. I think he's right.
Poster child of an innocent era
Didata was the poster child of the late 1990s tech boom on the JSE – a throwback to a time when investors were innocent (read: "utterly naive") and threw money at ideas and concepts rather than assets and cash flows.
I can remember how robustly Didata traded through the emerging market crisis, giving many investors a false sense of security about the resilience of tech stocks.
Futuristic notions overwhelmed the elements of sensible investing. Technology was the wave of the future, and perhaps tech stocks would not be vulnerable to the normal stock market cycles or traditional value/earnings models. If my memory serves me correctly, Didata hit a high of 7 500c in late 2000.
But when Didata fell – shortly after its listing on the London Stock Exchange – it fell with a resounding crunch. Thousands of investors on the JSE learnt very quickly how to distinguish between froth and fundamentals.
Not surprisingly, one of the more astute local investors – the Rupert family, in the form of Venfin - backed Didata in its darkest hour by providing a convertible bond.
Ultimately the bond (and other smaller transactions) secured Venfin, now part of Remgro, a 25% stake in Didata.
Many market watchers at the time were sceptical of Venfin's willingness to fund Didata – which admittedly did not exactly meet the Rupert's usual investment criteria of boasting strong global brands, pumping reassuring cash flows or holding a dominant position in its various markets.
But the score card will now show that Venfin's shareholders have made a damned decent return on Didata. The value of the NTT offer in Venfin shareholders' hands is around 1 900c/share – a rough figure which does not include a CGT estimate or take into account currency fluctuations.
Moving in mysteriously rewarding ways
I specifically mention "Venfin's shareholders" because Didata – very wisely, with the benefit of hindsight - was not included when Venfin was merged with Remgro last year.
Instead, the 25% stake in Didata was left in an unlisted company Venfin DDT Holdings - a seemingly clumsy arrangement that perplexed market watchers, many of whom felt the stake should have been included in the Remgro/Venfin deal or unbundled to shareholders.
Indeed, Venfin DDT traded from the outset at a disrespectful discount to its only asset. In fact, in April this year I highlighted to readers that Venfin DDT was discounting its holding in Didata by 27% or about R1bn.
I suppose events now justify the decision by Venfin (and Remgro) to leave Didata out of the equation. If the Didata stake – which Venfin had flagged in the annual report as worth more than the market price – had been included in the merger, the value accorded to the holding would have been about 45 pence.
Venfin DDT shareholders now have an offer of 120 pence on the table, and the unlisted company will probably be smartly wound up after paying a liquidation dividend.
Sometimes the Ruperts move and shake in mysterious ways, but more often than not shareholders get well rewarded.
- Fin24.com
No rumours, no cautionary - only the slightest firming of the Didata share price since around mid-April offering a faintest of clues to a possible deal. And the way most of my caustic cohorts consistently dismissed the merits of investing in Didata, I am rather stunned that such a major organisation came calling.
What's probably more intriguing is the premium NTT is prepared to pay over the average market price for the last three months. If anything (what with several small tech firms listed on the JSE going belly-up) I reckon investors were on the whole quite bearish on Didata – even though the company has tweaked its trading margins rather encouragingly of late and presented a reinforced balance sheet.
The fact that Didata's share price pushed past NTT's inferred buyout price of 1 392 cents per share (based on an offer price of 120 pence at Thursday's exchange rate) might raise some eyebrows.
While it would be tempting to speculate that the movement in Didata's share price to as high as 1 417c post the NTT announcement suggests a rival bidder could emerge, it might be more reasonable to put this trading down to a few punters desperately covering short positions.
For those investors (ahem) ruing an aversion to Didata there was, in early trading on Thursday, the chance for a quick flit into the JSE's other tech conglomerate, Datatec [JSE:DTC]. Datatec, on Thursday, was up over 5% in sympathy with Didata's all-of-a sardine revaluation.
My old colleague Shaun Harris reckons the Didata buyout - and delisting - really signals an end of an era on the JSE. I think he's right.
Poster child of an innocent era
Didata was the poster child of the late 1990s tech boom on the JSE – a throwback to a time when investors were innocent (read: "utterly naive") and threw money at ideas and concepts rather than assets and cash flows.
I can remember how robustly Didata traded through the emerging market crisis, giving many investors a false sense of security about the resilience of tech stocks.
Futuristic notions overwhelmed the elements of sensible investing. Technology was the wave of the future, and perhaps tech stocks would not be vulnerable to the normal stock market cycles or traditional value/earnings models. If my memory serves me correctly, Didata hit a high of 7 500c in late 2000.
But when Didata fell – shortly after its listing on the London Stock Exchange – it fell with a resounding crunch. Thousands of investors on the JSE learnt very quickly how to distinguish between froth and fundamentals.
Not surprisingly, one of the more astute local investors – the Rupert family, in the form of Venfin - backed Didata in its darkest hour by providing a convertible bond.
Ultimately the bond (and other smaller transactions) secured Venfin, now part of Remgro, a 25% stake in Didata.
Many market watchers at the time were sceptical of Venfin's willingness to fund Didata – which admittedly did not exactly meet the Rupert's usual investment criteria of boasting strong global brands, pumping reassuring cash flows or holding a dominant position in its various markets.
But the score card will now show that Venfin's shareholders have made a damned decent return on Didata. The value of the NTT offer in Venfin shareholders' hands is around 1 900c/share – a rough figure which does not include a CGT estimate or take into account currency fluctuations.
Moving in mysteriously rewarding ways
I specifically mention "Venfin's shareholders" because Didata – very wisely, with the benefit of hindsight - was not included when Venfin was merged with Remgro last year.
Instead, the 25% stake in Didata was left in an unlisted company Venfin DDT Holdings - a seemingly clumsy arrangement that perplexed market watchers, many of whom felt the stake should have been included in the Remgro/Venfin deal or unbundled to shareholders.
Indeed, Venfin DDT traded from the outset at a disrespectful discount to its only asset. In fact, in April this year I highlighted to readers that Venfin DDT was discounting its holding in Didata by 27% or about R1bn.
I suppose events now justify the decision by Venfin (and Remgro) to leave Didata out of the equation. If the Didata stake – which Venfin had flagged in the annual report as worth more than the market price – had been included in the merger, the value accorded to the holding would have been about 45 pence.
Venfin DDT shareholders now have an offer of 120 pence on the table, and the unlisted company will probably be smartly wound up after paying a liquidation dividend.
Sometimes the Ruperts move and shake in mysterious ways, but more often than not shareholders get well rewarded.
- Fin24.com
