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HOSKEN CONSOLIDATED INVESTMENTS PLANS TO RE-CAPITALISE OCEANIA

12 Dec HCI Australia

HCI re-capitalising Oceania to capture new deals

Empowerment giant Hosken Consolidated Investments (HCI) looks set to re-capitalise its Australian subsidiary, Oceania Capital Partners (Oceania), to capture new deal flows.

Documents forwarded to shareholders this month show that Oceania intends raising A$14,9m (R135m) through the issue of 9,6m new shares at A$1,55/share. The decision to raise additional cash follows a cash distribution of A$17m (R155m) to Oceania shareholders and a recent share buyback exercise. The shares-for-cash issue will increase Oceania’s cash holdings to A$36,6m (R335m).

HCI, which holds 67,7% of Oceania, has indicated a willingness to subscribe for A$10m (R91m) of the shares-for-cash offer. HCI secured control of Oceania only late in 2011.

Former HCI executives Michael Jacobson and Brian Scheiner – who now serve on Oceania’s board – will, together with CEO Robert Moran, also partially underwrite the new share offer by A$3m (R27m).

The shares-for-cash capital-raising exercise is somewhat surprising since HCI had earlier this year committed to subscribe for 10m Oceania shares at A$2,15 after the capital distribution and share buyback exercises. The same offer terms had been extended to Oceania’s minority shareholders.

But it seems the Oceania share price (currently around A$1,58) has drifted too far away from the A$2,15 level, making such an exercise unattractive to minorities (and HCI).

Whether the new capital raising is attractive enough for minorities to participate remains to be seen. Depending on the minority uptake, HCI’s controlling stake could vary between 63% and 70% of Oceania after the new shares are issued.

It’s not clear at this stage what Oceania has identified as potential investment targets. But documents sent to shareholders noted that the Oceania board had considered various investment options and realised there was a need to supplement existing cash resources to consider a broader range of investments.

Oceania’s sole investment is a joint controlling stake in debt-management business Bayport.

HCI CEO Johnny Copelyn indicated in the company’s recently released annual report that it was the company’s intention to grow Oceania and enhance value for HCI.

He noted: “We have a good management team with whom we have a long relationship focused on developing our interests there.”

Oceania is one of HCI’s smallest investment hubs with a market capitalisation of around R360m, which represents less than 3% of HCI’s R13,4bn market capitalisation.

Source: Financial Mail – Marc Hasenfuss