BCX not so blue
With some valuations as low as 500c/share – independent analyst Irnest Kaplan says BCX is worth 500c to 600c/share tops – the immediate downside for shareholders could have been much greater than the 7% drop off to 722c/share on the first trading day after the Competition Tribunal turned the deal down.
That’s probably due to a combination of the market holding out for another suitor and that BCX remains a highly regarded company, despite having come under pressure.
New CEO Benjamin Mophatlane says BCX never put itself on the market nor is it looking for an alternate suitor – despite having had some calls from private equity players. Instead, Mophatlane says, one priority is to ensure there’s an anchor shareholder to deter hostile bidders.
However, if there are potential – albeit unsolicited – suitors in the wings the most obvious is Altron’s Bytes. Its CEO, David Redshaw, has made no secret of his continued interest in BCX since it entered the fray alongside Telkom in late 2005. A Bytes/BCX deal would create a R7,5bn in turnover diversified IT group.
But Bytes withdrew because the price was too rich. It isn’t known for overpaying. Redshaw says he’s thinking about the course of action that Bytes should take, but hasn’t made a decision.
Mophatlane says Gadlex – the black economic empowerment company of which he’s part – would look to switch its shareholding in BCX up from the operating to the holding company level and bring in additional empowerment shareholders, including women’s groupings and staff.
The market is also interpreting the possibility of an “anchor shareholder” as being a significant but not controlling big brother investor; Kaplan suggests the likes of a VenFin or a Reunert.
Mophatlane says obtaining finality brings certainty, which will enable it to get back down to business. He concedes the uncertainty had a negative effect on the company, but downplays that, saying it only lost one senior executive; Willem van Rensburg. Mophatlane admits some other staff cited the deal when resigning, but says there wasn’t a mass exodus.
Kaplan says although BCX may not have lost clients it undoubtedly lost business to competitors that it otherwise might have gained. However, Kaplan says BCX can undo some of the damage by refocusing. He says it still has a “fantastic reputation” with customers, an “immense ability” to deliver and good skills.
BCX will report year-end numbers a few weeks from now. The negative effect was already evident at the half-year, with BCX describing itself as “inwardly focused”. Those efforts included migrating customers to its new data centres and implementing software platform SAP.
Mophatlane says his first priority is to reassure staff and customers and present a new leadership team. He’d then have to ensure the business is appropriately staffed and the costs appropriately structured. “We need to start growing. This business has a lot of potential, with great talent.”
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