Deutsche Bank, the lumbering 150-year old German financial institution, will be happy about the outcome of last week’s US elections. The bank, which has been on the wrong side of almost everything over the past 20 or so years, is exposed to the Trump Organisation to the tune of around $340 million (R5.3 billion). Big chunks of that are based on highly-inflated property valuations.
Deutsche, which is already the focus of probes into money laundering and other nefarious activities, is keen to avoid being dragged into investigations into Donald Trump’s business dealings. No doubt, if it cannot sell the debt, next January Deutsche will be near the top of a queue of entities looking for repayment from the former president.
Still on matters German, the Financial Times (FT) reports that audit firm EY has increased its list of multinational clients in that country, despite the high-profile implosion of its client payment processor Wirecard, which was one of the most valuable financial services provider in Germany until its shock collapse.
According to the FT, in a special audit of Wirecard, KPMG found that in 2016 EY missed the chance to delve deeper into suspected accounting fraud. EY now faces investigation by Germany’s audit regulator and lawsuits from Wirecard investors.
On the subject of auditors, a lot of Truworths shareholders will likely be miffed by the board’s decision to hold onto EY for another two years, until the introduction of the mandatory audit firm rotation regulation kicks in in 2023 and forces it to change auditors.
Many assumed that last year’s launch of a search for a replacement meant the long-serving external auditor was set to be changed this year or next.
David Constable, a CEO again
Long-suffering Sasol shareholders may have been surprised to hear last week that David Constable has been appointed CEO of Fluor Corporation effective January 1, 2021. According to its press release: “Constable is a versatile executive with significant international experience and a proven track record of driving growth and value creation across multiple industries.” This is the same Constable who was paid eye-watering amounts of money by Sasol between 2012 and 2016.
While he was successful in streamlining some administrative processes and curbing fixed cost increases, his main legacy was his decision to focus the group’s growth strategy on the extremely ambitious Lake Charles Chemicals Project. As we all now know – billions of dollars of write-offs later – that didn’t go terribly well. Despite some severe cutbacks, Sasol is continuing to battle with high debt levels and a share price too weak to support a hefty rights issue.
Constable, whose only job ahead of his appointment to Sasol was with Flour, headed straight back there in 2016 with his hugely generous South African remuneration. As of next January, he will be the head honcho at that US-based company.
Opportunities being taken
The financial misery that has accompanied Covid-19 lockdowns across the globe hasn’t been bad news for everyone. For the lucky few with access to lots of cash it’s been the source of exciting opportunities.
Over at Texton Property Fund, not entirely Covid-related, chair Marcel Golding has been able to build up an unassailable 40.51% stake in the company at bargain-basement prices, thanks to the wipe-out in the share price. Golding will score big time if Texton’s net asset value proves to be closer to the company’s ‘real’ value than the share price. It looks like a good bet, but of course nothing is certain.
And, having bought back John Deere’s stake in Bell Equipment, the Bell family will surely now move to buy out all the minorities. But will it be at a Covid-19 knockdown price or closer to net asset value?
And then there’s Comair, where a lucky few players are in the process of getting control of an airline at Covid knockdown prices.
What of the minority shareholders in these cases – is anybody looking out for them?
Automotive group Motus powered ahead with its share buyback programme this year, seemingly intent on ignoring the Covid impact on trading. This week it announced it had spent R335.3 million buying back shares at prices varying from a high of R75 in February to a low of R41 in October. Although it missed the August share price low of R29, its most recent bout of buying is looking good right now, given that the current share price is R52.71. But that could look very different – better or worse – in the coming weeks.
The day after announcing the rights issue, Motus issued a voluntary announcement warning shareholders of Covid-related uncertainty in its markets. But it assured them its liquidity position remains strong.