Stellar Capital buys stake in Torre

 

STELLAR Capital Partners, the newly constituted investment company aligned to retail tycoon Christo Wiese, will acquire an influential stake in industrial supplies and services business Torre for R690m.

According to a Stock Exchange News Service (SENS) announcement released on Monday night, an unidentified vendor consortium will sell 133-million Torre shares to Stellar.

This will secure a 26.25% stake in Torre, making Stellar its single largest shareholder. The transaction will be settled mostly by the issue of new Stellar shares at 200c (R568m), with the R122m balance in cash.

Although the members of the vendor consortium were not disclosed, Torre — in a separate announcement — announced that financial director Roy Midlane had swapped 12.5-million Torre shares for Stellar scrip.

The deal, according to market watchers canvassed, was surprising, considering Stellar’s initial investment core in technology and financial services.

But the company had previously indicated it was keen that one of its investment pillars be made up of industrial interests.

Alpha Wealth portfolio manager Keith McLachlan said the Torre deal suggested Stellar was taking shape as a private equity-type counter.

“The deal looks like it will give them access to a larger funding pool with which to grow their businesses aggressively.”

The deal continues a busy period for Stellar, formed from the remnants of the former technology company ConvergeNet.

The company recently tilted at taking a major stake in struggling asset management business Cadiz, and was also likely to score from selling its meaningful stake in vehicle tracking firm Digicore after an offer from an offshore entity. Stellar also has control of electronics manufacturing specialist Tellumat.

Stellar said the Torre deal represented an opportunity to achieve immediate scale in its investment portfolio. The company believed Torre would also enhance the quality of the investment portfolio by introducing a dividend-paying asset with attractive growth prospects.

Torre, headed by former corporate banker Charles Pettit, embarked on an aggressive acquisition spree three years ago. The company has accumulated a wide range of industrial interests — including Tractor & Grader Supplies, Control Instruments (now Torre Automotive), Kanu Equipment and Setpoint.

In the year to end-December 2014,Torre generated revenue of R562m and after-tax profit of close to R50m. In March the company paid a maiden dividend of 3.5c per share.

The company — which was effectively built from the old SA French crane hire group — now boasts a market capitalisation of about R2.5bn and has managed an enviable compound annual growth rate in share price since a listing of more than 75%.

Stellar also has a chance to push up its stake in Torre to 34.5%, and has approached other Torre shareholders with a similar scrip swap offer.

Torre’s major shareholders include listed investment company Sabvest, several institutions (most notably Momentum and Investec Asset Management) as well as the company’s management team.

Post-deal speculation last night centred on whether other industrial assets would be sourced by Stellar, or whether Torre would be the conduit for further acquisitions.

Significantly, Mr Wiese is one of the largest shareholders in industrial supplies company Invicta Holdings, which appears to be focusing on securing further footholds offshore.

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