GSE begins year with 2-mega corporate restructuring deals

Despite its dismal performance in 2018, which saw significant drops in both the composite and financial indexes, the Ghana Stock Exchange has started 2020 on a bright note with two major corporate finance deals taking place during the first two weeks of trading.

One involves a merger of three pharmaceutical companies – two of which are long standing publicly listed companies – into one huge listed firm and the other involves a major share offer, albeit by private placement and thus not open to the general public, being made by one of the largest publicly listed commercial banks, Agricultural Development Bank.

On Wednesday, January 15, 2020, three pharmaceutical companies – Dannex Limited, Ayrton Drug Manufacturing Limited and Starwin Products Limited – will begin trading on the Ghana Stock Exchange as one merged firm under the name Dannex Ayrton Starwin Plc (DASPHARMA).

This will mark the completion an Amalgamation Scheme which started in the last quarter of 2018.

In view of this, trading in the shares of both AYRTN and SPL – which are long standing publicly listed companies on the GSE – have been suspended from Thursday January 9, 2020 until they are delisted on Wednesday January 15, 2020.

Information available to Goldstreet Business indicates that in the merger, each new Dannex share will be exchanged for 3.15 Ayrton shares, and each new Dannex share will be exchanged for 13.31 Starwin shares.

Once the merger becomes effective, each Ayrton shareholder will receive 0.32 new Dannex shares in exchange for each Ayrton share, and each Starwin shareholder will receive 0.08 new Dannex shares in exchange for each Starwin share.

In 2016, Dannex Limited became the majority shareholder in both Starwin Products (71.33 percent) and Ayrton Drug (53.47 percent).

The merger will create the synergies and upscaling that will enable the consolidated company compete effectively and profitably both in Ghana and across West Africa.

The merger values each Ayrton share at GHc0.13 and values Ayrton at GHc 6,900,000.00 based on the combination of the Discounted Cash Flow (DCF) and Market Comparable valuation of GHc 26,900,000.00

The merger values each Starwin share at GHc 0.03 and values Starwin at GHc 7,700,000.00 based on the combination of the Discounted Cash Flow (DCF) and Market Comparable valuation of GHc 7,700,000.00

The Merger values each Dannex share at GHc 0.3943 and values Dannex at GHc 18,700,000.00 based on the combination of the Discounted Cash Flow (DCF) and Market Comparable valuation of GHc 18,700,000.00

The outstanding shares of Dannex Ayrton Starwin Ltd post-merger shall be 84,765,898.86 and the market capitalization post-merger shall be GHc 33,424,740.14

ADB targets GHc127m to recapitalize

The other major corporate financial restructuring deal is that of Agricultural Development Bank (ADB) which is offering a private placement of 39,076,924 ordinary shares of no-par value to the Ghana Amalgamated Trust (GAT) to raise GHc127 million in order to recapitalize.

The private placement which started on Friday, January 10, this year, is expected to end Tuesday, January 14, 2020, with listing of shares planned for Tuesday, January 21.

The flotation of the shares, which comes at a placement price of GHc3.25 per share, is part of ADB’s recapitalization exercise and is billed to support its holistic growth.

Unlike Initial Public Offerings (IPOs), which are open to the general public, the private placements are targeted at specific investors who usually invest huge sums of money.

Thus, GAT will have representation on the board of directors of ADB who will provide the strategic direction of the bank.

According to ADB, this is pursuant to Regulation 40 of the Ghana Stock Exchange Listing Rules, 2006.

The equity injection was approved by the shareholders of ADB at its annual general meeting on August 28, last year, and the Securities and Exchange Commission (SEC) on January 2, this year.

Serengeti Capital is the lead manager and sponsoring broker for the offer.

A communication by the bank said, “Trading will not be suspended during the offer period; hence shareholders on the register of members of Agricultural Development Bank may continue to trade their shares on the exchange as usual. The new shares will be admitted to the main market of the Ghana Stock market and will rank pari passu to existing ordinary shares in ADB in all respects. Following the admittance of the new shares, total number of ordinary shares in issue will be 300,798,407.”