To market, to market to buy a fat pig. Wow, just wow. We are having another power crisis at the southern end of Africa, not in the board rooms or in the cabinet meetings, but rather the type that keeps the aircon off. If that is the worst of my problems, then I am sure that I am going to be OK for the next ten days or so. We could probably all do with a cold shower up here, it has been very warm. Poor folks down in the Western Cape, that weather looks like it is for ducks and geese. Although, with the country being a semi arid one, rain is always welcome here, tell that to the people who have their structures washed away. Exactly.
There is a great speech delivered by Ben Bernanke last evening that you must get some time to get through, at the National Economists Club Annual Dinner, Herbert Stein Memorial Lecture, Washington, D.C.. " .. Responding to the financial crisis and its aftermath soon became the Federal Reserve's main focus. As it has turned out, however, following the stabilization of the financial system, supporting our economy's recovery from the deepest recession since the Great Depression has required a more prominent role for communication and transparency in monetary policy than ever before." Good, yes, this is true. Ben Bernanke of course is possibly the best student of the Great Depression, so entrusting him with leading the central bank that leads all central banks policies, that was possibly the best appointment since .. ummmm .. I cannot think of a better one. Janet Yellen?
Oh, and this is important: The Stock Market Is Not Doomed To Crash - Here's The Full Argument Why. And then this is also important: The Dow is hitting a record high. No, for real this time: "Adjusting the figures using the consumer price index for all urban consumers (or the CPI-U) from September, the all-time closing high for the Dow Jones Industrial Average was set Jan.14, 2000, at 16,261.40. On Tuesday morning, the Dow crossed 16,000 yet again, meaning we're getting close." Interesting, is it not? We are basically nearly 14 years on from that abnormal tech induced all time high, clearly back then at MUCH high valuations. But this is how it always works sports lovers, different people will put forward a different sets of numbers to suit their viewpoint of the world.
Aspen. I saw the news that GSK were going to be selling one third of their stake in Aspen, selling 7 percent down from their 19 odd percent. Or, as per a Reuters article that I read 28.2 million Aspen shares. Here is the .pdf -> GSK announces intention to sell part of its holding in Aspen Pharmacare Holdings Ltd. The best source is always the company, I almost always find that. Investor relations went from an absolute shambles to possibly one of the most important part of a public companies armoury. The fairly short release explains it all:
GSK today announces that it intends to sell up to approximately one-third of its 19% stake in Aspen Pharmacare Holdings Ltd (Aspen). The disposal will be through a placing of ordinary shares in Aspen to institutional investors (the "Offering").
The Offering is expected to comprise up to 28.2 million Aspen ordinary shares equivalent to c. 6% of Aspen's issued share capital, leaving GSK with a stake of c.13% if all the Aspen ordinary shares available in the Offering are sold. The offer price will be determined by means of an accelerated bookbuild process which is to start immediately. A further announcement will be made following completion of the bookbuild and pricing of the Offering.
The history and background of the relationship is equally brief, GSK remember acquired the stake as far back as 2009, The first announcement back on the 12th of May 2009 to be exact: As consideration for the Transactions, Aspen will issue 68.5 million ordinary shares to GSK (approximately 16% of Aspen's issued ordinary share capital after the issue thereof).
The value of the transaction back then was 3.47 billion Rand, 411.5 million Dollars or 272.6 million Pounds. OK, so that was for 68.5 million shares. They (GSK) then acquired more shares to raise their stake along the way. But divide 68.5 million shares by 3.47 billion Rand and you get to 50 odd Rand. In Pounds, that is 3.97 Pounds. Fast forward to now, let us apply the same math, 28.2 million shares at 267 Rand, that translates to 7.5294 billion Rand. Or, at the current rate to the Pound, 460 million Pounds. 16.31 Pounds a share, they (GSK) have more than a fourfold increase in four and a half years. Wow.
But a seller is a seller, especially when it is your biggest shareholders winding in their holding. GSK have had their own problems. It is a massive company, with a 79.2 billion Pound market cap, that is 1.3 trillion Rand, this is as you can see, is a very small relative to their size. They trade on a multiple of 20 times and have an astonishing 4.7 percent dividend yield. Is 460 million Pounds big when compared to 79.2 billion? It is significant for Aspen (6 percent of the company) but only 0.58 percent of the GSK market cap. GSK still keep 12 percent. They still have a board seat, the relationship still exists. We will see in the book build who gets the shares and at what price, but you can imagine the share price is down today.
Home again, home again, jiggety-jog. US Futures are lower, just a tad really, but there have been a couple of days of down here since that 1800 S&P 500 level.
Sasha Naryshkine and Michael Treherne
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