To market, to market to buy a fat pig. What the hell? The third quarter SARB bulletin was released yesterday ->
But locally the market sold off harder than the rest of the globe, financials and banks were the hardest hit, as were the retailers. Yech. The only thing that worries me is that the bond vigilantes have deeper pockets that are quicker than our wagging stick could possibly hit. If someone decides that we are "not good for it", bond yields could spike in a hurry. But that is always a concern, I would think that emerging market bond funds have nimble enough feet, but more importantly pain tolerance and understanding of the country.
No two markets are the same anywhere in the world, Byron has already told us some juicy stories this morning about South America and getting off buses in the middle of the night and being searched by the military. Nope. That does not happen here. But at the same time we are still not in the top 40 countries when it comes to global reading and maths standards. China tops both lists for 15 year olds, on what I presume is a standard measure. If you want to know what I am talking about, check this Economist graphic: Education performance of 15 year olds. Wow. How is your 15 year old doing with regards to their math or reading? We all like to think that our respective children are geniuses.
Adcock, CFR and Bidvest. Adcock obviously are scrambling here to indicate to their shareholders, which include the PIC and Bidvest (26 odd percent between them) that the CFR deal is best. The Adcock release from yesterday, this part is probably the most important:
OK, we need a refresher. The offer to Adcock shareholders from CFR had the support of a whole host of parties (around 45 percent), including Sanlam Asset Management, Visio Capital, ABSA asset management, Stanlib, Afena Capital and 36One Asset Management, who collectively (Back in the middle of November) owned 29.3 percent of the stock back then. This process of courting Adcock has been an 8 month process (nine now) by CFR and I am pretty sure that they have invested a lot of time, not to mention money in trying to get this deal done.
The specifics of the original CFR are as follows:
So you will possibly get somewhere around 55 percent cash and then the balance will be new CFR shares, rough price 73.51 Rand a share. The most important question is, what do you get when you own CFR stock? The company trades at a fairly significant premium to the rest of the that Chilean market. 1.3328 times, suggests the Bloomberg page. The last annual report of CFR suggests that the Weinstein family owns 73.2 percent of the company. So what liquidity will there be for shareholders here? More importantly, how many shares in issue that side, and potentially this side? Lots. The company has annual revenues of 571 million Dollars last year, roughly 6 billion Rand, when compared to 5.445 billion Rand of Adcock. 2012 CFR profits were 80 million Dollars, around 850 million Rand, Adcock had a poor year and registered income of 587 million Rand. You are quickly starting to see why CFR cannot pull out a massive check-book and pay for all of Adcock. They cannot.
Bidvest, well they may be able to do that, their market cap of 82.454 billion Rand, profits of 4.772 billion Rand make the fund raising and the buying much easier. So why the lower stake from Bidvest? I still think that the Bidvest option is better, you get cash and not equity of an entity that is tightly held (little liquidity) and more expensive scrip than you would like. Cross border, cross cultural relationships, a local board that seemingly is not well regarded by the market, nothing really changes that much. Perhaps the Bidvest option with a newer and fresher board and management team would be a far better for shareholders. The tension is building here.
Byron beats the streets. He is back and is giving his views on the Americas!
Yesterday I got back from a 3 month trip to Central and South America. When asked how the trip was I have three possible answers. The 2 second version, 'Amazing!' The three minute version which goes through the Itinerary and the 5 hour version which touches on some (just some) of the details. Luckily for you I will just explain the itinerary and because this is a financial piece and not a travel blog, I will give you my opinion about the future of that side of the world.
Itinerary
We started with 4 days in New York which was an incredible experience and a great testimony to what man can achieve with a bit of team work. And what brings these people together? Dare I say it but incentives created by capitalism. Then we flew down to Mexico where we spent a week on the Caribbean. From there we bussed through Central America starting in Belize to Honduras to Nicaragua and lastly Costa Rica. Jungles, mountains, volcanoes and of course beaches were our playgrounds for the month.
From there we took a very expensive flight to Columbia which is not as dangerous as everyone says and a must see destination. From Columbia we entered Peru through the Amazon jungle, headed through Peru via Machu Picchu and bussed it into Bolivia. Bolivia is all about mountains and harsh landscapes. After a week exploring we went through the salt flats into the Chilean desert and flew down to Santiago. It was great to be back in a first world city.
After a few days in Santiago we bussed across the Andes to Mendoza in Argentina where we drank wine and ate steak for breakfast, lunch and supper. We cut across the country on a bus where we spent a week in Buenos Aires and then went across on a ferry to Uruguay. After a few days in a little surfing village we headed to Southern Brazil where we caught another very expensive flight to Rio de Janeiro, our final destination before coming home.
Of course all of the 13 countries we visited have their own separate issues but generally there were a couple of common trends which I picked up. Firstly, there is still very much a market place type retail environment. Foods were sold in a very informal manner, unrefrigerated and not always fresh. As you can imagine, their fresh food supply was in abundance with plenty of rain in the region but I can imagine a lot goes to waste. When we did find a shopping mall or a supermarket they were absolutely packed and the queues were almost unbearable, especially in the supermarkets. We are very lucky here in South Africa with our first class retailers, you have no idea what a difference it makes and we certainly take it for granted. Clothes were also very expensive. It was either handmade stuff in the markets or really expensive branded goods. No cheap, value for money options like Mr Price.
The buses were decent and always in good supply. That was our main source of transport. South Africa defiantly needs to up their game with public transport. I believe that the Rea Vaya here in Joburg is finally starting to function, we'll have to wait and see about that.
Other than Brazil, everything was done with cash. If you pay with a card they can charge you up to 10% extra which they blame on Visa. Of course this is not true and they are trying to avoid taxes. I suppose it does benefit both the retailer and the consumer because the consumer avoids paying VAT. The government and indirectly the collective lose out on huge revenues of course. I would suspect this will change as governments improve tax collection and retailers actually realise that having a card service is beneficial. We couldn't buy many an item because we didn't have the cash on us. Later on that turned out to be a blessing. In the big cities cards were generally accepted. I'm sure that trend is fairly new.
Politically the locals have exactly the same complaints that we have here. Corrupt governments, dirty police, not enough support from the state and bad services. As with South Africa there are also huge expectations from the government and everyone feels entitled. Many times I felt like telling people to get off their bums and do it themselves. Especially when it came to complaining first world travellers. Often I did. The age of entitlement is a global issue. A big one.
All in all it certainly made me realise that we have a very good thing going on here in South Africa. The world class private companies (retailers, banks, communication) make our lives so much easier. We take that for granted. Other than Bolivia every other country was more expensive than South Africa. The services were so bad in Bolivia, I can see why it is cheap. In fact not even McDonalds could survive in Bolivia (the only one that opened there lost money and was closed).
Our roads are good, our flights are cheap and our tourism options are just as good if not better. Yes we have issues but so does everyone else including Europeans and Americans. It's all relative I guess. What I do know though is that the grass is certainly not greener on the other side. It's good to be home.
Home again, home again, jiggety-jog. Nice to all have everyone back in one place. Byron has a wild beard. Hopefully we can get a picture tomorrow. For now markets are higher. Gold stocks are trading at levels I have not seen in years, more than a decade actually. How sad.
Sasha Naryshkine, Byron Lotter and Michael Treherne
Follow Sasha, Byron and Michael on Twitter
011 022 5440
the cash offer price of ZAR70.00 per Ordinary Share is below the current value of the proposed scheme consideration offered by CFR Pharmaceuticals S.A. ("CFR") (approximately ZAR75.00 per Ordinary Share based on the volume weighted average price of CFR shares for 30 trading days up to and including 2 December 2013, excluding the potential value of synergies that could arise from the combination of Adcock Ingram and CFR);
A minimum of 51% and potentially up to a maximum of 64.3% of the R12,6bn total consideration will be settled in cash, with the remainder in new CFR shares.
No comments:
Post a Comment