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SEARDEL RIGHTS OFFER TO GIVE HCI CONTROL

CLOTHING and textile manufacturer Seardel said yesterday it would launch a rights offer to shareholders to raise R300m, effectively giving Hosken Consolidated Investments (HCI) control of Seardel.

Seardel has had a torrid time in recent years as cheap clothing and textile imports knocked profitability and eroded its market share, while the tighter Inflationary environment is adding to the pressure.

Seardel ordinary and N ordinary shareholders will be offered 6,66 ordinary shares for every ordinary or N ordinary share held. The subscription price is RO,50 for each rights offer share, representing a huge dilution. Seardel shares took a beating yesterday, losing 18% on the day — albeit on a slim 6 000 shares trading hands in two deals — to close at R3,50 as the market digested the news.

The offer will be underwritten by HCI and Grawood Investment, a company controlled by Seardel founder and majority shareholder Aaron Searli, to the tune of R200m and R50m respectively.

But the A Searil Descendants Trust, Grawood and the South African Clothing and Textile Workers Union, which together hold 14,5-million ordinary shares and 29,5-million N ordinary shares, making up 49% of Seardel’s issued share capital, will cede their rights under the offer in favour of HCI.

Searll said the rights issue was needed to strengthen the balance sheet and protect the more than 15000 workers.

“We have seen R12bn worth of textiles and clothing imported, and retail conditions are getting tougher. The board decided to tie up with HCI, a respectable firm. This is the right move at ‘the right time,” he said.

Seardel’s underlying net asset value is R1,5bn (about R16 a share) and talk has been rife that HCI could asset-strip it. But Nedcor retail analyst Syd Vianello said it would be hard for HCI, an empowerment group with strong union links, to justify the loss of thousands of jobs.

Source: Business day – Mathabo le Roux