Buy: Zeder
Agribusiness investor Zeder embarked on a wind-down over six years ago, delivering returns of more than 20% per year along the way. Yet, with the end of its innings in sight, the shares have weakened and still trade at a discount of over 25% to NAV. The main concern relates to the disposal of Zaad. The long-stop date was extended from July to November, but management indicated the transaction remains on track, with the Comesa competition authority subsequently approving the deal unconditionally. The Public Investment Corporation’s involvement in the acquiring consortium adds some uncertainty, particularly given the institution’s recent challenges. The deal structure does, however, suggest a case of “funding secured”, although any required waivers or amendments could still present a risk. A distribution of around 70c a share following completion would leave the residual assets, predominantly May Seed and cash, trading at a discount of roughly 50%. Hyperinflation has complicated the May Seed sale, but a disposal mandate is believed to have been awarded.
Sell: Omnia
Omnia’s management deserves considerable credit. Since its near-death experience in 2020, the share price has risen sevenfold, with dividends making the return even more impressive. The recent approach from India’s Solar Industries is a fitting way to cap that run. That said, aspects of the proposed buyout are worth interrogating. While the price values standalone Omnia fairly, shareholders receive little benefit for the significant synergies the combination could unlock. Without Solar listing locally or offering scrip, JSE investors cannot participate in that upside. Nor does the price appear overly generous when Solar intends to fund much of the acquisition by gearing up Omnia’s unencumbered balance sheet. The current deal spread also inadequately compensates investors for a lengthy transaction requiring approval from eight African competition authorities. Indications of support from shareholders representing only around 20% of the shares at the announcement suggest that broader shareholder support cannot yet be taken for granted.
Cheesman is partner at Urquhart Partners
