GNDE - Grindrod starts book building for pref share issue

03/08/2005 11:04:32

Grindrod starts book building for pref share issue
August 3, 2005

By Samantha Enslin

Cape Town - Grindrod, the shipping and logistics group, yesterday kicked off a book building exercise for a preference share issue to raise R500 million, which will be used to grow the group's rail operations, pursue private-public partnerships, fund major acquisitions and take advantage of shipping opportunities.

The private placement may raise as much as R750 million. It will be split between institutional investors and private individuals through distributors Investec, Sanlam and Marriott.

The minimum subscription is R100 000 an applicant, and the preference shares will be issued at R100 each. The book build, which will be concluded by next Friday, will determine what percentage of the prime rate investors will receive as a dividend.

Grindrod has already spent R500 million of the R1 billion earmarked for acquisitions of land-based businesses.

These acquisitions include rail, terminal, commodity trading and marine fuel supply businesses. The capital raised through the preference share issue will be used to increase the contribution to earnings of the group's land-based businesses.

Grindrod expected to expand its non-shipping operations through its skills base, partnerships with industry experts, acquiring and growing businesses that were complementary to shipping, and cross-marketing its services, said managing director Ivan Clark.

The land business strategy is to provide a supply chain service from the factory gate to the local or foreign end-user. Grindrod's land businesses include ships agencies, automotive logistics, clearing and forwarding, warehousing and logistics, and perishable cargo agents.

Mark Currie of Investec's treasury and specialised finance division said: 'Grindrod's annuity income is sound. The company is on a sound footing and will easily be able to service its commitment to preference shareholders.' Preference shareholders have a preferred right to dividends over ordinary shareholders but do not enjoy the same growth potential.

A preference share is a lower-risk investment than an ordinary share as it has a set return in relation to the prime rate.

From Grindrod's perspective a preference share issue costs less than a rights issue. It is good for the group's debt-to-equity ratio, which for the year to December stood at 49.2 percent.

Grindrod's share price rose R1 to R49 and the transport sector increased 4.92 percent.

Back to securities exchange news feed