Kgalagadi Breweries Limited’s (KBL) parent company, Sechaba Holdings Limited’s potential delisting from the local bourse, the Botswana Stock Exchange (BSE) could have a massive shock effect on financial markets of Botswana, experts have said.
While the group has not come out and put it on record that they are planning on delisting, a cautionary statement released mid December has caused considerable speculation to the effect. The statement reads, “Sechaba Brewery Holdings Limited herby advises shareholders that the company’s board of directors is assessing the full impact of certain corporate change proposals that if embarked upon and successfully implemented may have an effect on the price at which the company’s securities trade.”
The statement fuelled speculation that the company’s largest individual shareholders, SAB Miller, who own 40 per cent through South Africa Brewers may take it private. SAB Miller had put forward a proposal to buy out the rest of the shareholders and take the company private. Some experts have stated the reason behind this move was the hostile approach that the government has adopted towards liquor trading in the country, which has inhibited KBL’s growth potential.
Despite the hostile trading environment, Sechaba has managed to remain a solid stock and the company has turned out profit year after year since the introduction of the alcohol levy in 2008. Experts have expressed worry that while the company has managed to stir the tide and continue to be profitable despite the circumstance, sooner or later they would have no more space to grow. SAB Miller’s taking full control would mean that they have the option to run operations from South Africa if they deem it more profitable.
Reached for comment, KBL’s spokesperson Mokoro Ketsitile referred most of Gazette Business’ enquires to the statement made by the board.
Karabo Tladi, market analyst at Black Thread is of the view that the biggest loser in this move would be Botswana investors due to the size of the local stock market and available investment vehicles. He said out of the 23 listed companies on the board, only ten were quality stocks and Sechaba is one of the leading stocks.
“With a ROE of over 70 per cent, Sechaba gives more value to shareholders. If Sechaba is delisted it means investors will lose all these benefits. Our market will become more illiquid. Investors won’t know where to put their money with few investment opportunities available for them,” Tladi opined.
For delisting to take place and SAB Miller to obtain a 100 per cent stake, they would have to make an appealing offer to the minority shareholders.
The investors who could possibly be left in the lurch include the likes of the Botswana Development Corporation (BDC), Motor Vehicle Accident Fund and Botswana Public Officers Pension Fund, which, when combined with the rest of the market own 60 per cent of the company.
Ketsitile stated that currently, KBL employed 935 people across the country in the company’s four operating brewing houses, two in Gaborone, one in Francistown and another in Lobatse.
Tladi said from a shareholder’s perspective, which the Botswana government is too through the BDC, taking the company private made sense considering the current uncertain operating environment. “The (alcohol) levy at 50 per cent, limited trading hours (for liquor outlets) and traditional beer regulations. The next thing they will do is closing down of brewery plants and it means people losing their jobs,” Tladi cautioned.