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Servgro's chest unlocked - and treasure... Sluggish JCI drifting off empowerment h... |
Servgro's chest unlocked - and treasures come pouring out
Potential foreign partners wanted a stake in parts but not the whole, and the group saw the writing on the wall, reports MARCIA KLEIN
Now chairman Van der Walt is intent on crushing it to nothing in an unbundling process already half done and due for completion by September. Van der Walt says the group's market capitalisation reflects 49% compound growth over the past five years. Of its total value, R3-billion has been distributed to shareholders, and he hopes to conclude the final phase of unbundling by September, if not sooner. In the first phase, Servgro sold off a 63.7% interest in financial services group Forbes, 85% of car rental firm Avis, and a 19.1% holding in publishing group Naspers through N shares. In the second phase, Servgro will dispose of and/or distribute to shareholders its cash resources and holdings in TV rental and cellphone company Teljoy (47.6%), entertainment group Interleisure (44.3%), hospitality company Fedics (33.3%) and toll and parking company Interpark (42.8%). Valuation of Servgro has always been difficult because many of its investments were unlisted (Forbes and Avis have listed only recently, and a listing for Fedics is planned). The unbundling has certainly unlocked value, evident in the share's rise from a level of R22.50 in January to R30 prior to the first phase of the unbundling. Commenting on the remaining assets, Van der Walt says Teljoy has experienced a turnaround in its results and its cash flow has also improved. "There are several opportunities and we have had various discussions." Servgro is looking at various alternatives - selling the company or distribution to shareholders or a partial sale and partial distribution. But it will not consider splitting the company into TV rental and cellular phones. The investment in Teljoy has probably been the most disappointing to Servgro. "Teljoy went into cellular for bust and now hopefully for boom," says Van der Walt. "This was the only financial disappointment we had. It was the right decision to go into the cellular business, we just did it in too big a way. The financial setback was, however, temporary and has been overcome." There has been much speculation about Interleisure, jointly held by Servgro and Kersaf. "This is the dominant remaining interest and at 670c, its value to Servgro is R564-million, so our attention and focus on this investment is quite substantial," Van der Walt said. Servgro is in discussions with Kersaf, which has a pre-emptive right. "We are also talking to other interested parties and hope to conclude a deal by the end of May," he says.
Servgro is considering listing the 33.3% held Fedics, but is still working on the timing. Interpark is a relatively small part of the portfolio. Various parties, including management, are interested in the tolls and the parking sides of the company and in the company as a whole. The first three companies unbundled were valued at R3-billion. Van der Walt says that "the million-dollar question is how much the balance is worth". At the current share price of 720c, the four remaining investments are valued at R900-million, but Van der Walt says he hopes to realise more than the current market price. "Building up the group was exciting. People queried such a diverse portfolio, but we developed the companies substantially. Acquisitions were done within the companies, so we allowed them to grow and create value." Nearly all the group's companies are listable, but they were not when Servgro was formed in 1992. "We created the platform", says Van der Walt, and "we can see from the scoreboard what we have achieved". He says there was scope for further growth, but as the market capitalisation increased it became more difficult to dilute Sankorp's interest in line with Sankorp's broader strategy. "Within South Africa the material leisure opportunities are not that available so acquisitions would not have diluted Sankorp's share enough. We did not want to lose focus and we looked at foreign opportunities, but there were none. Potential foreign partners said they were interested in a stake in the subsidiaries but not in the group, and this sent us a message (to unbundle)." As Servgro listed some companies, it became evident that the holding company was trading at a discount, but "it is not always easy to establish the discount until you go through the process". Excellent results to end-March could also have seen the share climb.
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