CAPE Town-based investment firm Stellar Capital Partners (SCP) – which spearheaded by deal- making whizz Charles Pettit and retail tycoon Christo Wiese – looks ready to rumble.
Stellar – at the time of going to press – was looking to buy certain financial services assets from Steenberg-based Prescient and had just clinched an agreement to sell a 51% stake in Retreat-based technology manufacturer Tellumat to empowerment group Masimong Technologies for R180m.
There is not too much detail on the negotiations with Prescient at this point, but Stellar’s deal with Masimong revealed some interesting detail around Tellumat – most notably that the technology solutions and services company had recorded revenue of R551m and operating profit of R30m for the 12 months to the end of September 2015.
The shift into financial services (remembering Stellar also has control of Cape Town-based asset manager Cadiz) and sale of the majority stake in Tellumat – at face value – signals a shift away from industrial activities by Stellar. But that might not be the case. The Tellumat deal was necessary to ensure the company’s empowerment credentials were at the appropriate level to continue servicing lucrative state and parastatal contracts.
What might also reinforce Stellar’s position in the industrial sphere is whether it takes advantage of the tough trading predicament faced by its 34% owned associate Torre Industrial.
Torre, which was build up by Pettit from a single crane hire operation into a diversified industrial dynamo, is now grinding along in some harsh trading conditions.
A recent trading update covering the year to end June advised that earnings would be lower than last year after Torre experienced disappointing trading results for the four months ending April - including the traditional slow month of January as well as the Easter period.
Pettit reported that the weaker trading performance was primarily due to the challenging operational environment for industrial groups - including weak commodity prices, low business confidence and a volatile exchange rate.
He added that Torre had focused on the consolidation of its business and had not completed any material acquisitions in the current financial year.
Petit said unit sale volumes in the consumer businesses were also down compared to prior periods. He said cost-optimisation measures had been implemented across the company – especially in the under-performing business units.
The billion rand question now is whether Stellar might pounce on Torre in its moment of weakness, pitching an offer to buy out the shares it does not own in the business?
Last year Torre had a market capitalisation of over R2,5m, but a drop in its share price has seen its market value reduced to closer to R1,3bn. Whether this lower valuation will entice Stellar to make a move on Torre remains to be seen.
By Jenni McCann