Ascendis Health recapitalisation vote is battlefield of vested interests
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THE NOTES leading to Ascendis Health’s important shareholder meeting on October 4 to vote on its recapitalisation has become a battlefield of vested interests as they eye the remaining value in the group.
The major institutional shareholders of Ascendis Health are the International Finance Corporation, holding 12.6 percent and Kefolile Health Investments, holding 11.7 percent.
The company leapt into the spotlight last Friday after it quashed take-over rumours, sending its shares spiralling down 10 percent, only on Monday, October 6, for the firm to issue about a 3 000 word SENS statement around the incident citing “representatives of certain investment firms, based in the US (the third party)”, while Ascendis again reminded shareholders that it would be good to vote for the recapitalisation, and not to pay attention to “unhelpful” market speculation.
Harry Smit, the representative of Retail Activist Investors, said yesterday there were several interested parties in Ascendis, who were “drawing their lines in the sand” with a deep interest in the recapitalisation vote outcome and he expected it would be a bidding war for the remainder of the assets.
Retail Activist Investors, recently called Ascendis Activist Investors, is a lobby group which aims to represent the interests of retail investors in Ascendis Health. Retail investors comprise about 42 percent of the Ascendis Health shareholder base.
Lawrence Mulaudzi, a director from investment firm Kilimanjaro Capital, an Ascendis shareholder through his stake in Kefolile, and who has benefited from Public Investment Corporation funding, threw his hat into ring this week, warning, “the road ahead seems long with potential risk and not much upside for shareholders”.
He said: “Kefolile, for one, holds about 12 percent of the voting rights and is still not certain yet about the value proposition.”
This as the troubled health and wellness company, valued at R269 million and crippled by debt of R7 billion, is fighting to emerge with a few assets after a group recapitalisation plan; instead of going the business rescue route. Ascendis Health will spend about R290m on the fees for the recapitalisation, more than its market capitalisation.
Despite the high cost to the company’s health, Retail Activist Investors are backing the plan, with which Ascendis Health said yesterday it had engaged extensively.
Retail Activist Investors over the past few days have conducted a survey on Twitter about “What do shareholders want?”.
Smit said the survey was off a base of 200 people responding in 24 hours, representing 70 million shares in terms of the survey. He explained that Retail Activist Investors held 130 million shares in Ascendis. However, in terms of the recapitalisation plan, it needs 75 percent of shareholders to back it, representing 489 million shares.
The survey results showed 92 percent of shareholders would be willing to entertain offers with a floor price of R2 plus post recapitalisation, saying the “post recap entity would probably be more valuable that the floor price of R2”.
The survey also said 95 percent of shareholders would like to see value unlock post the recapitalisation in the next six months, whether through a potential offer to shareholders or through a merger or offer resulting in shares in another listed entity.
Furthermore, 92 percent of shareholders that responded would rather see Ascendis acquired by or merged with another entity post recapitalisation, as opposed to the management optimising Ascendis over two years while using a debt facility provided by the current debt holders.
Mulaudzi this week wrote a letter saying he wanted to provide feedback on the Ascendis SENS circular from a top shareholder’s perspective, specifically with regard to concerns about the steps still required to complete the restructure and secondly what value may be left for shareholders after the restructure.
He said if one considered the remaining business as per the circular, and incorporating the interim results where the information on the business divisions were split out, there did not seem to be much value left for shareholders, but a great deal of risk ahead.
He calculated that shareholders would be left with an equity value of between R110m and R200m or between 22c per share and 40c per share if “all goes well”.
He said even if the remaining businesses were sold, they would likely attract a lower price to earnings multiple and after transaction costs, capital gains tax costs, costs of head office retrenchments and wind-down costs, there did not seem to be much left for shareholders.
He said the ultimate question shareholders were asking was, after all this was there much or any value left for shareholders after the debt restructure?
“If 25 percent of shareholder present at the meeting (traditionally 18 percent to 20 percent of voting rights) do not see any value in the restructure, there is risk that they may not pass it,“Mulaudzi said.
Mark Sardi, chief executive of Ascendis Health, said the company recognised that shareholders were wanting to understand the value in the “new” Ascendis Health post the completion of the recapitalisation and they needed further information to determine the value of the company.
“We are addressing this through a communications programme ahead of the shareholder vote on the recapitalisation on October 4.
“This will include the release of a trading update in the week of September 20, and the release of our annual results on September 30.
“As part of our broader engagement strategy with institutional and retail shareholders on the group recapitalisation over the past months, we have engaged with Mr Mulaudzi and will continue to do so,” he said.