Some missing links in Putco deal coming together
IN LIFE it is often not the things you can see that you should be worried about it is things you cannot see.
The deal structured recently to enable Putco to become majority black-owned keeps crossing my desk. It has become something like the wind I can feel it, but there is something about it I cannot see.
I have written about this deal twice. My second article was followed by a vigorous debate between Putco MD Michael Oldham, financial director Basil Holford and myself. My attention has been drawn since then by a minority shareholder Anthony Sedgwick of Polaris Capital to a number of issues.
These are beginning to enable me to see the things that have been hidden until now.
The first is a comparison. Hosken Consolidated investments, managed by Johnny Copelyn and with the South African Clothing and Textile Workers` Union as its major shareholder, recently bought Golden Arrow, a fairly small regional bus operator, for R250m. Whatever else may be said of Copelyn, he is not known to overpay for assets.
Putco, on the other hand, larger by far, is valued at only R145m. Yet it is expected to deliver a net profit of about R53m for financial 2004 and is selling 28% of its shares for R560000 to a consortium led by Saki Macozoma`s Safika.
The attributable profit to the new black shareholders will be about R15m. What is more, the profit is in the bag.
No matter how generous Albino Carleo may be, irrespective of how anxious he is to execute a black empowerment deal, this is void of commercial reality.
The second issue is another comparison. What happened after Enron, Worldcom, Xerox and other corporate scandals to the auditing profession?
Accountants were told bluntly by no less a figure than Finance Minister Trevor Manuel that conflicts of interest within their companies would no longer be tolerated.
Yet in this case, Sedgwick points out that Ernst & Young has acted not only as Putco`s auditors, but also as its corporate advisers and sponsor. And there is something about the pension fund surplus that still concerns me. That surplus is R166m and will receive my attention.
Finally, what about other previously disadvantaged shareholders who have written to me asking why they are being sidelined? The general meeting of shareholders to consider the proposals is scheduled to be held tomorrow.
Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information.
