African Rainbow Capital Investments Plans to Delist from JSE and A2X Markets

African Rainbow Capital Investments (ARCI), part of the broader African Rainbow Capital group owned by well-known businessman Patrice Motsepe, plans to delist from the JSE and A2X markets via an offer to buy all the shares.

ARCI’s share price increased 4.7% to R9.14 on the JSE Tuesday morning. ARCI has offered its shareholders R9.75 a share cash, which is a 12.6% premium to the closing price of R8.66 on March 14, and a premium of 21% to the R8.06 per share 30-day average price.

ARCI’s board said they wish to delist because there is limited liquidity in the shares, and the share price does not reflect the “true value” of the investments in the ARC Fund, so investors in ARCI are not receiving the true value of their investment. The offer is anticipated to result in a return of value for investors, they said.

The Mauritius-domiciled investment company also proposed to make South Africa its headquarters, as all its shareholders are South African, and the company has failed to attract significant foreign investment, as envisaged earlier in the plan to be domiciled in Mauritius.

At the time of listing ARCI, the reasons for incorporating in Mauritius were its business-friendly environment and its tax treaties not only to attract capital from investors outside South Africa, but also to facilitate investments outside South Africa, if required by international investors.

“ARCI attracted very limited international funding, and no funding due to the Mauritian structure. Also, ARCI is mainly invested in South African companies. The cost to operate and oversee the operations of ARCI in Mauritius has become increasingly expensive,” ARCI’s board said.

In addition, tax legislation changes since the ARCI listing had resulted in tax inefficiency for South African resident ARCI shareholders.

ARCI also released its financial results for the six months to December 31. It said high interest and unemployment rates, falling consumer spending, the uncertain implementation and impact of GNU policies, and a volatile foreign exchange environment had created challenging trading conditions for some of its companies.

ARCI’s diverse investment portfolio had nonetheless proven resilient, while the challenging conditions had also created opportunities for the investment portfolio.

The value of ARCI's interest in telecommunications company rain had increased by R399m to R5.67bn. This was due to the business progressing past the significant net cash outflow period, the launch of rainOne and the use of the spectrum acquired in the last auction.

“Its network received a significant upgrade to Huawei's Apollo 5.5G, enhancing performance and capacity... Rain launched new offerings,” ARCI’s board said.

Digital bank Tyme Group made up 16.3% of ARCI’s investment fund value, and comprises investments in TymeBank and Tyme Global, through the Tyme SA Holding and Tyme Group Asia.

The combined value of Tyme Group reduced from R3.93bn on June 30, 2024, to R3.45bn as at December 31, after Sanlam Life disposed of its shares in ARC Financial Services Investments (ARC FSI) in exchange for shares in ARC FSH.

At Tyme Global, the GOtyme customer base more than doubled to 5 million.

ARCI’s intrinsic net asset value (INAV) per share increased by 3.2% to R12.78 (30 June 2024: R12.38). Cash in the ARC Fund increased to R575m (R163m), as a result of the transactions with Sanlam. Debt in the fund reduced by 5% to R1.64bn (R1.73bn), as a result of the transactions with Sanlam.

During the period under review, ARCI, through the ARC Fund, made acquisitions and disposals amounting to R698m and R1.26bn.

Further investments were made in ARC FSH, Kropz Group, Rain, and ARCH Emerging Markets Partners. It also sold its shares in TymeBank and Tyme Global to ARC FSH and sold part of its shareholding in Val de Vie.

The ARC Fund's net fair value gains amounted to R840m. The main driver in these gains was an increase of R351m from the Financial Services portfolio, which was in turn driven by gains in Tyme Group Asia, Alexforbes, and Sanlam Third Party Asset Management.

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African Rainbow Capital Investments plans to delist from JSE and A2X markets