A Super Group truck.The group, through its subsidiary Bluefin Investments, plans to dispose of its 53.58% interest in SG Fleet for AU$641.4 million (R7.53 billion). Picture: Supplied
Super Group’s share price ramped up 19.6% to R33.14 yesterday after it announced a plan to pay a special dividend of around R16.30 per share, should the R7.53 billion sale of its stake in Australia-based SG Fleet Group go ahead.
With SG Fleet comprising about half of Super Group’s earnings, Urquhart Investments (@UrquhartPartner) commented yesterday on “X”: “Few management teams would consider shrinking their empire dramatically, even if it is in shareholders’ best interests, but this might be the case here.”
Australia-based SG Fleet is in discussions with private equity firm Pacific Equity Partners (PEP) for PEP to acquire all of the shares of SG Fleet at a price of AU$3.50 per share. SG Fleet has proposed a scheme with PEP-owned Westmann Bidco, for Bidco to acquire 100% of SG Fleet for AU$3.50 per share, cash.
Should the scheme be implemented, Super Group will, through its subsidiary Bluefin Investments, dispose of its 53.58% interest in SG Fleet for AU$641.4 million (R7.53 billion).
SG Fleet, listed on the Australia Stock Exchange since March 2014, provides integrated management solutions, including fleet management, vehicle leasing, and salary packaging services. It employs about 1 300 staff and manages over 27 000 vehicles.
PEP is a large Australian private equity firm, managing and advising the PEP funds, which have over AU$12bn in assets under management.
“While a share buyback from Super Group would have created more value, distributions of 1 630 cps on a 2 772 c share price are great. The remaining core Super Group business will be less geared and would have had 230 cps earnings at FY2024. On an 8x earnings multiple, there is over 20% upside to a share price of around 3 450c,” Urquhart Investments (@UrquhartPartner) said.
Super Group’s board said the proposed deal would create a liquidity event for Super Group after many years of investment in SG Fleet, while still allowing the group to continue its involvement in integrated logistics, transport, and mobility solutions.
The deal would allow Super Group’s shareholders to unlock significant value in SG Fleet and realise a “significant premium to the estimated value of SG Fleet, as reflected in Super Group’s share price.”
The deal also demonstrated the significant undervaluation by the market of the remainder of Super Group’s business.
The AU$3.50 per share offer represented a 31% premium to the SG Fleet closing price on November 22, the last trading date prior to the announcement of the transaction. The deal would allow Super Group shareholders to realise long-term value upfront.
Also, given the historical undervaluation by the market, there was no guarantee that future value creation through SG Fleet would be fully reflected in the Super Group share price, the board said.
Super Group planned to use a portion of the proceeds, up to R1.96bn, to reduce debt, and the balance sheet would be strengthened, as evidenced by the net gearing falling to 22.8% from 171.8% at June 30, 2024.
After the deal, Super Group would be repositioned as a diversified logistics and mobility solutions provider in Sub-Saharan Africa, Europe, and the UK with a “resilient, flexible, and sustainable finance profile, and a cash generation ability.”
Looking ahead, it would continue with its Supply Chain, Fleet Africa, and Dealerships divisions, and these would benefit from increased management and capital allocation focus if the deal went ahead.
Also, after the transaction, the group would have a simplified group structure with a single listed entry point providing great visibility for investors.
The book value of SG Fleet’s net assets attributable to Super Group shareholders was AU$313.7m (R3.81bn) at June 30, 2024.
BUSINESS REPORT