Solar Industries India’s share price slumped an unprecedented 9% on the BSE (formerly the Bombay Stock Exchange) the day after it announced a firm intention to acquire JSE-listed chemicals powerhouse Omnia.
Solar’s shareholders are apparently concerned about the dilutory impact of Omnia’s margins of about 11% on Solar’s defence-fortified margins of about 23%. They’re also perplexed about the inclusion of Omnia’s fertiliser and agricultural businesses; there’s nothing similar in Solar.
This means Omnia shareholders hoping to extract a higher price from the Indian buyer will have to make a persuasive case.
Mind you, the Solar share price was defying gravity at the time it fell, trading at 44 times ebitda, up there with US tech firm valuations. Perhaps this is no surprise, given that Solar is classified as a defence company.
The 9% drop skimmed it back to a still-steep 40 times ebitda rating.
Certainly, based on its seven-year track record, the R134.50 a share offer for Omnia looks generous. This is a company that needed a R2bn rights issue in September 2019 to avoid breaching bank covenants. An aggressive, ill-considered spate of acquisitions, ambitious capital projects and adverse market conditions had wreaked havoc on the balance sheet, forcing the company to turn to its shareholders.
The direness of its situation was evident from the R20 a share at which the rights issue was pitched. A few years earlier, Omnia had been trading at a high of R184.
After the rights issue came Covid, and by May 2020 the share was trading at R15.
It turned out to be the low point of Omnia’s share history. Under new leadership, the company resumed its strong growth trajectory and the share dragged its way back towards previous levels.
After a strong surge late last year, taking it to a high of R111 in July, the share eased back until the September 10 cautionary hinting at the deal. This explains why the premium on the R134.50 offer is anything from 14.3% to 70.69%. It’s a case of “pick your starting date”.
The modest 14.3% is the premium to Omnia’s closing price on the JSE on September 11, the last business day ahead of the September 14 announcement. But by September 11 the share price had surged to R117.67 from R102.69 on the back of the cautionary.
The 70.69% was the premium on Omnia’s closing price of R78.80 on December 31 2025, which may seem a tad random as a comparative date but does highlight the extent of the share’s recent recovery. Perhaps equally random would have been the selection of September 2013, when Omnia was trading at R136.20.
The deal looks even more generous if the recent dividend payment is included. “Given that Omnia recently went ex-dividend by 750c a share, I understand the offer was effectively R142 before the dividend and R143.50 ex-dividend,” says Smalltalkdaily’s Anthony Clark, an enthusiastic backer of the company for years.
However, there is the counterpoint — if all goes according to plan — that Omnia shareholders will likely have to wait for up to 12 months before being paid out, during which they will not receive dividends.
But right now, this does look like another case of an undervalued South African equity being cherry-picked off the JSE by an international player.
“I have been arguing since November 2025, when the share was R76.57, that Omnia was undervalued, with trapped value within BME [the explosives and mining chemicals segment], and that a sale or stake sale was a potential outcome,” says Clark.
As always, the attractiveness of the offer depends largely on the price at which shareholders bought into the company. And most shareholders who bought in over the past 10 years, particularly those who bought into the rights issue, will find R134.50 difficult to resist and may take the deal and bank a nice profit.
But then, it also depends on the opportunities they have for that nice profit. Will they be able to find an alternative that offers the same growth prospects and generous dividends?
CEO will be in clover
One shareholder likely to be accepting the offer is Omnia CEO Seelan Gobalsamy. Omnia’s remuneration report reveals he had about 1.26-million restricted shares at end-March 2026. According to the joint announcement, if the takeover scheme is successful all performance conditions attached to the shares will be deemed as fully met. This means Gobalsamy will be able to pick up his R170m of shares. He will also collect the R8.5m in dividends paid out on those shares since they were allocated to him.
Gobalsamy, a former head of Stanlib, is the force behind what Clark describes as the “extraordinary” recovery of the past seven years. Not only has he resolved Omnia’s pre-rights issue problems, in particular working capital management, he has also successfully led the group into international markets.
Given Omnia’s recent track record, it’s unsurprising that Solar intends holding on to management. According to the joint announcement outlining the offer, Solar intends to leverage that team’s experience and “substantial operating capability … to continue pursuing Omnia’s strategy to drive growth and create value for customers and other stakeholders”.
But will the R134.50 be enough to swing the deal? Ironically, slides from the RMB Morgan Stanley Off Piste Investor Conference held on September 16 and 17 (days after the offer was announced) provide many reasons for shareholders to hold on. The 33 slides essentially describe a great South African champion with exciting local and international ambitions, all achievable without a major global player such as Solar at its side.
Plans to improve shareholder returns include scaling international growth in Australia, Canada and the US. This will be accompanied by strategies to increase asset turn by growing the core businesses, increasing plant utilisation and optimising working capital. Then there’s the disciplined capital allocation.
Richard Cheesman of Urquhart Partners tells the FM the offer price may seem generous on the basis of Omnia’s historical performance, but doesn’t look particularly enticing if you plug in Solar’s expectation that Omnia will bump up profits substantially, even before any synergies are realised.
“Based on a conference call with India-based analysts, Solar appears to expect Omnia’s earnings to increase by roughly two-thirds before taking any synergies into account,” says Cheesman. “If that plays out, the offer price, which looks reasonably full based on historical earnings, starts to look rather different on a forward basis.”
All in all, it’s difficult to see how Omnia would benefit from having Solar as the owner rather than continuing to go it alone as a JSE-listed entity. (Solar has made it clear Omnia will be delisted if its offer is successful.)
The joint announcement does describe the many benefits Omnia will enjoy. Most significant is that as part of a well-capitalised international group, it will have “access to additional capital, complementary technology and new markets”.
Well, judging by recent years’ results and the investor conference, Omnia has been doing all of this very well on its own. As for access to additional capital, the rate at which the company is pumping out dividends — ordinary and special — suggests capital is not a restraining factor in its growth.
For South Africa, as opposed to the shareholders, there’s the claimed benefit of a significant inward foreign direct investment. Certainly, the R21.8bn price tag sounds good, except that it doesn’t quite gel with Solar’s comments to the India-based analysts.
During the conference call Solar CEO Manish Nuwal indicated that Omnia’s cash and strong balance sheet would be used to fund the acquisition. “What we have planned is basically that we have to utilise the strength of Omnia’s balance sheet, which has a cash surplus position in the account. On top of that, we will definitely take debt on Omnia’s books,” Nuwal told the analysts.
Cheesman tells the FM: “This looks very much like a leveraged buyout funded largely by the target itself.” So not much chance of money coming into South Africa.
According to the joint announcement, 19.6% of shareholders have indicated they will support the deal. That number is remarkably close to the 19.3% the Government Employees Pension Fund (GEPF) holds beneficially. That is just a coincidence — the Public Investment Corporation (PIC) does not give support in advance. Omnia’s latest annual report reveals that as at end-March, other major beneficial shareholders were Allan Gray (5.67%), Camissa Asset Management (4.24%), Peregrine Capital (4.11%) and Vanguard (4.05%). Their combined holding is 18.07%.
The spread of shareholders is significant, given that Solar wants to implement the transaction through a scheme of arrangement. A scheme requires not only the support of the board, but also the passing of a special resolution. This will need the backing of 75% of the shareholders attending the scheme meeting.
So, as usual, much depends on where the GEPF or the PIC sits on the deal. If the GEPF does not accept the offer, its 19.3% would be sufficient to block it at the scheme meeting, given that 100% of shareholders never pitch up at these meetings.
But it’s difficult to imagine Solar would not have sounded out the PIC before launching its offer. This may be why the joint announcement refers to grand-sounding themes such as strengthening the “strategic economic corridor between South Africa and India” and “deepening trade investment and industrial linkages between two key emerging market economies and Brics partners”.
Never mind the hit the JSE will take.
