Best decision in 60 months29 Aug 2015 08:12
...ok...the management team prove themselves to be total idiots...again...so nothing new...I haven't seen a more clueless management team in my life...and believe me...I've met a few "village idiots"...what a "turn-around" that was....everyone saw this coming a mile away ...and I am starting to believe that these idiots got paid R20m a year to ensure that we end up where we are today....anyway...I think this is probably one of the best pro-active decisions that they have made...I can only guess that they have been advised by competent advisors, because they are far too "clueless" to have made a decision like this by themselves...
So let' s see what their advisors can accomplish in selling this...over R2.5 billion of assets, R500m of debt...and they are receiving circa R2 billion of revenue a year... so...if I was a major ferrochrome buyer and I want to get vertical integrated to cut cost...it would make sense to buy IFL's assets (net R2 billion) instead of paying R2 billion for the end product for one year (based on say 200,000 tons)...so the question is...at what price will Jisco, who is the largest shareholder, let this one go...they have already a strategic 27% shareholding...so all they need to do is acquire a few million more shares from one of their strategic SPV's to be bale to make a offer themselves...strategically it makes perfectly sense due to the potential chrome ore export levy's which is on the horizon in most countries...on the other hand, there is also a lot of synergies if it is merged with say other ferrochrome producers in the same area and some competitors are still augmentation their current production to enhanced the benefit of economies of scale ....so bottom line...don't write this off...too quickly... shareholders have spent over R3 billion the last 12 years to get the company where it is today...competitors are still paying R1.5billion for new smelters and the company has only R500m debt at this stage...the fact is that it is too small to survive by itself....so let's get it acquired by a "bigger player" and move on....the only question I have...why wasn't this done 5 years ago...we could have saved over R100m in salaries for an incompetent management team over this time and the net debt could have been R100m less :)