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WHERE TO FOR PUTCO?

15 Oct Transport

The offer by listed investment-holding group Hosken Consolidated Investments (HCI) to buy Putco might be the empowerment tonic that the struggling bus company needs to survive. HCI is best known as the principal shareholder in free-to-air television station e.tv. White-owned Putco desperately needs a BEE deal if it is to secure government transport contracts, which comprise a major part of the company’s earnings. HCI’s bid comes after a previous deal failed in July; in a tension-filled shareholders’ meeting, minorities succeeded in blocking an attempt by the bus company to push through proposals for a black economic empowerment deal. That transaction would have resulted in a consortium led by Saki Macozoma owning 63% of the bus company. “HCI is a listed empowerment company and following its acquisition of Golden Arrow [management has] the experience of the commuter bus industry,” said Anthony Sedgwick, an analyst at Polaris Capital. Sedgwick added that as a public company it might be easier for HCI to raise capital to fund the transaction, and for their ability to pay for Putco to be evaluated – should their offer be acceptable to Putco shareholders. John Biccard, an analyst at Investec, agreed that the HCI offer would is “a good thing” because they (HCI) have strong empowerment credentials and this will a go a long way in solving Putco’s BEE woes. HCI’s experience of the commuter transport industry results from its July acquisition of Cape-based Golden Arrow Bus Services for R250-m. Golden Arrow operates mainly in the Western Cape. If HCI’s offer for Putco goes through, it will also have operations in Gauteng, Mpumalanga, Limpopo Province, KwaZulu Natal and Botswana. After its previous attempt at a BEE deal was voted down by minorities, Putco warned that failure to introduce empowerment at equity level would have a material impact on the future of the company. “If the transformation objectives are not achieved, as a matter of urgency, Putco will not be able to derive income from its core business, being government sources (contracts).” Minorities, who control 47% of Putco, slammed the failed deal as the “worst case of rape of the minorities” and an attempt to dilute the value of their shares by two-thirds. Minorities were also miffed that Macozoma’s Safika would spend R500 000 – or about 1c a share – to gain 28% of the company. Minorities protested that Putco produced R53-m in profit after tax for the year to end-June and Safika’s 28% interest will be worth R14,8m, on an investment of only R500 000, which has not even been made yet, while the profit has. Sedgwick expressed hope that HCI’s offer is different from this “because they saw the reaction of minorities when the R5,50 a share offer was made.” Biccard advised caution on the new deal because the price has not been made public. Sedgwick agreed that a lot would depend on the terms of the transaction, which are yet to be made public. “But on the face of it, it looks interesting,” he added. Putco will make an announcement on Monday about whether it accepts or rejects the offer. Attempts to get comment from HCI were unsuccessful.

Source: Moneyweb – Chris Nthite