Abil issues 685 million new shares at discount

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Johannesburg - African Bank Investments Limited (Abil) has declared its R5.5 billion rights issue a “resounding success” with a 64.1 percent oversubscription, but the company said it could only tell shareholders today whether its black economic empowerment (BEE) partners had followed their rights. Yesterday the Abil share price closed 2.56 percent weaker at R12.18.

Analysts said yesterday that the slump in the Abil share price might have undermined the ability of the BEE partners to fund the rights issue uptake. The BEE shareholders had a 9 percent stake in Abil ahead of the rights issue.

In a statement yesterday, the Abil board of directors said the level of support for the rights issue “shows confidence in the company by shareholders”.

The rights offer was pitched at R8 a rights offer share, which was a 38.7 percent discount to the price at which Abil was trading ahead of the offer. It was fully underwritten by Goldman Sachs. Some 685 million new shares were issued in terms of the offer at a ratio of 84 new shares per 100 ordinary shares held as at November 15.

The cost of Goldman Sachs’ underwriting represented a significant portion of the R262 million of costs associated with the rights issue.

Abil executive balance sheet manager Markus Borner told Business Report: “It’s easy to say with the benefit of hindsight that we priced the issue too low or that we did not need it to be fully underwritten” but on the basis of the volatility of the share price the board believed the discount and the underwriting was necessary.

Borner said that some of the proceeds from the issue would be used to repay funding that was currently maturing.

“The proceeds will also be used to improve the group’s capital adequacy and to repair the balance sheet, in addition it will be used for general business purposes,” he said.

One irate shareholder said it was difficult to consider the rights issue as a “resounding success” given that it was based on a dramatic slump in the share price over the past 12 months. The share was trading at R12.24 ahead of the rights offer, which was down from a 12-month high of R33. During last year the share reached a high of almost R40.

The shareholder said it was disturbingly ironic that the rights issue had enabled chief executive Leon Kirkinis to raise his holding from 16.7 million to 22.3 million shares at no cost to Kirkinis. The shareholder was referring to trading by Kirkinis during the rights issue period. In early November Kirkinis sold 8.8 million shares at between R13.70 and R12.30 for R117.4m. He then bought R112.4m worth of Abil rights.

At the time of the trading, Kirkinis said he was confident that management had taken the “required action over the past few months to position the business for improved profitability over the medium to long term. The sale of the shares will enable me to exercise 100 percent of my allocated rights as a further investment in the company.”

In addition to the balance sheet boost from the rights issue, Abil is looking for a buyer for Ellerine Holdings, the furniture retailer it acquired in 2007 for R9.2bn.

Abil’s results for the year to September revealed an 88 percent slump in earnings to 45.1c a share. The results included a R4.6 billion goodwill write-off relating to Ellerine. - Business Report

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