Johannesburg - BidCorp, the food services business group that spun off from Bidvest Group, rose to more than double its parent’s market value on the company’s first day of trading, showing investors’ preference for South African stocks with greater international exposure.
BidCorp shares started trading on the JSE at R270 and rose to R281 by 2.20pm, valuing the company at R94.2 billion. The firm had gained 10.15 percent by 5.15pm to close at R304.
Read: Bidvest spins off foodservices unit
Bidvest, which will now focus on services such as car rental, freight and office management, is valued at R39.7bn.
Mergence Investment Managers portfolio manager Peter Takaendesa said: “If you add Bidvest and BidCorp’s prices, the shares are up close to 10 percent today. This is about positioning. I think some shareholders want the international exposure that you can find through BidCorp. Driving this is also market benchmarking to food services companies listed in the US and London, such as US peer Sysco.”
BidCorp, which supplies pubs, restaurants and hotels in Europe, South America and Asia, was the largest primary listing on the JSE since Vodacom in 2009, the JSE stock exchange said.
The unbundling yesterday marks the end of an era as Bidvest founder and chief executive Brian Joffe steps down.
Joffe, who founded Bidvest in 1988, said in March that he would step down after the unbundling.
Takaendesa said: “The market has full confidence in the new leadership of Bidvest and BidCorp. It was a good handover.”
Spin off
Bidvest, whose business also spans pharmaceuticals, car showrooms and shipping announced in February that it planned to spin off and separately list its food business, its biggest division, in South Africa. It had earlier said the business should be separated because its value was not reflected in the firm’s share price.
The separation would position the food business for a new phase of both internal and acquisitive growth, said BidCorp chief executive Bernard Berson before he opened trading in Johannesburg by blowing the ceremonial kudu horn.
He said: “The focus we now have as a stand-alone company will strengthen management’s determination to continue generating and enhancing sustainable long-term returns for all stakeholders.”
Plans to list the food business in London were abandoned in 2014 and private equity buyout bids for it were rejected three years earlier.
“I was slightly surprised to see the big value difference between BidCorp and Bidvest shares,” said Michael Treherne, a portfolio manager at Johannesburg-based Vestact, which holds both stocks.
“It just shows you the value that people are giving to offshore assets compared to South African assets.”
Takaendesa said: “The remaining Bidvest assets are largely South African and are exposed to risks in southern Africa, such as if South Africa gets downgraded. It’s less diversified now.”
“It’s certainly unlocking some short-term value for Bidvest shareholders,” said Avior Capital Market analyst Mark Hodgson.
Ahead of the unbundling on May 26 ratings agency Fitch placed Bidvest’s national long-term rating of AA on a negative rating watch and said that the continuing Bidvest operations, holding only Bidvest’s industrial operations, would have a weaker business risk profile following the separation.
It would review this decision once Bidvest, excluding the food service business, published its audited annual results for financial year to June, but expected the ratings to “likely be downgraded”.
Diversified profile
It said that the combined group’s rating was previously supported by the diversified operational profile and geographically spread revenue stream, which was largely driven by the defensive food services division counterbalancing the more cyclical automotive and freight segments.
Fitch viewed the remaining Bidvest group industry segments as more volatile and less geographically diverse than the more defensive food services division.
BUSINESS REPORT