An unexpected announcement from PSG Group that it plans to unbundle all its underlying investments to shareholders boosted its share price by 22% to above R100 when the JSE opened for trading on Tuesday. Via a Sens announcement, management indicated that the restructuring and the distribution of most of the underlying interests is the only sure way to unlock the discount to its intrinsic value.
While PSG was very successful in noticing the right investment opportunities and identified fast-growing companies – while taking a very active approach that built companies from scratch – management says in its announcement that the PGG share price traded consistently at a significant discount to its underlying value.
PSG decided the only option to unlock the hidden value is a total restructuring.
Read the full Sens announcement here.
“As a JSE-listed investment holding company, the main objective of PSG Group remains to create wealth for shareholders on a per share basis. However, the share price of PSG Group has unfortunately been trading at a significant discount of approximately 30% to the value of its underlying investments (or the so-called sum-of-the-parts value) in recent years, despite significant value-unlock initiatives undertaken,” it says.
Management referred to the unbundling of PSG’s interest in Capitec in the later part of 2020, which unlocked R21 billion in value.
Becoming direct shareholders in Capitec benefited PSG shareholders by nearly R95 per PSG share.
PSG holds interests in companies that operate across a diverse range of industries. These investments include financial services (PSG Konsult), education (Curro and Stadio), food and related businesses (Zeder and Kaap Agri), route-to-market services for fast-moving consumer goods in southern Africa (CA&S), as well as early-stage unlisted investments in select growth sectors.
PSG says in its announcement that the board of directors is considering the unbundling of its JSE-listed investments in PSG Konsult, Curro, Kaap Agri, CA&S and 25.1% of the issued shares in Stadio to shareholders.
Thereafter, PSG will make a cash offer to shareholders to acquire their shares. The remaining shareholders will then hold 100% of PSG Group, with its remaining assets comprising mainly its investments in Zeder and PSG Alpha (the latter holds predominantly early-stage investments) and its remaining shareholding in Stadio.
Ultimately, it will result in the delisting of PSG from the JSE.
The company will focus on the remaining investments, most notably the early-stage investments that require further capital, management oversight and strategic input. Furthermore, the restructuring will ease the administrative and regulatory compliance obligations, while unlocking significant value for shareholders, according to the announcement.
Listen: Keith McLachlan of Integral Asset Management on benefitting from delistings (read the transcript)