14 December 2006
Despite a recent spate of private equity bids that could see companies worth tens of billions of rands delisting from the JSE, the number and value of businesses listed on South Africa’s stock exchange continued to grow in 2006, Business Times reports.
Noah Greenhill, marketing and business development general manager at the JSE, told Business Times that new listings had added about R80-billion to the JSE’s market capitalisation in 2006.
This would leave the JSE well ahead of the game even if all the private equity deals currently on the table were to go ahead and companies like Edcon, Shoprite, Alexander Forbes and Consol – together worth R55-billion, according to some estimates – were to leave the exchange.
Private equity players eye SA
South African retail groups Edcon and Shoprite, money manager Alexander Forbes and glass company Consol have all warned in recent months that they have received or are considering multi-billion rand bids from private equity groups.
According to Business Times, private equity firms Brait and Ethos are the major local players involved in the bids, while international group Actis is behind the Alexander Forbes bid.
However, Business Times reports, there is speculation that a number of other foreign groups – including Kohlberg Kravis Roberts, Bain Capital, Blackstone Group and Goldman Sachs – are showing new interest in private equity investment opportunities in South Africa.
JSE ‘not worried’
Stocks in private equity companies, unlike those in publicly listed companies, are not freely tradable on public exchanges. Private equity deals have in the past accounted for about 5% of South Africa’s mergers and acquisitions deal flow, but some analysts believe this could increase substantially in the future.
The JSE’s Greenhill told Business Times he believed there was a place for both listed and non-listed investments, but did not expect there to be a flood of private equity deals in South Africa, despite the current flurry of bids.
Those companies that did delist might also return to the JSE once the cycle turned, as commonly happened internationally, Greenhill added, noting that private equity investors tended to look five to seven years down the line, after which they typically sold their companies on to other private equity buyers or took them public again.
AltX, Yield-X gain momentum
Greenhill also said on Friday that AltX, the JSE’s alternative exchange for small to medium and growing companies, was gathering momentum after a slow start three years ago.
Greenhill told Business Day that the combined market capitalisation of the companies that listed on AltX in 2006 was R5.4-billion – up from R1.9-billion in 2005 – giving the exchange a total capitalisation of R7.4-billion.
Separately, Business Day also reports that trade on Yield-X, the JSE’s interest rate exchange, has risen 136% since its launch in February 2005, with the value of trades up from R14-billion last year to R33.3-billion so far this year.
“SA has traditionally been very passive in the derivative market, including the interest-rate side, compared to international counterparts,” Warren Geers, the JSE’s senior manager for Yield-X, told Business Day this week. “But this is starting to change in line with world trends as the cash spot side of the market gets overtaken by derivatives.”