SHIPPING and logistics giant Grindrod signalled on Friday that it could raise substantially more capital than first envisaged in an upcoming shares-for-cash issue.
The company, which has investment giant Remgro as an anchor shareholder, initially said it intended to raise R3bn for various capital projects in its recently-released annual report. But in a SENS announcement on Friday, Grindrod noted its board approved an equity capital raising process for an issue of new shares of up to R4bn.
The proposed capital raising exercise comes about 30 months after Grindrod raised R2bn in a specific share issue to Remgro.
Grindrod will earmark R3bn for planned capital expenditure, with the balance used to buyout existing empowerment partners in subsidiary companies.
Grindrod CEO Alan Olivier noted in the company’s annual report that capital investments were crucial to expanding infrastructure. He cautioned that most of these investments were long-term projects, which would only achieve a targeted 15% return on capital in the medium term.
In the SENS announcement Grindrod reiterated its intention to develop strategically positioned port, terminal and rail capacity. It has a pipeline of expansionary capital projects with forecast spend topping R10bn over the next three years.
Grindrod said the new capital would fund planned expansion of terminal and port capacity (Maputo, Richards Bay, Saldanha and Coega) as well as rail infrastructure and locomotives and more investments in agriculture.
Grindrod will also use part of the new capital raised to acquire the interests of black economic empowerment (BEE) partners, Calulo Investments and Solethu Investments, in unspecified operating subsidiaries in exchange for cash or Grindrod shares. This will trigger a new BEE arrangement with Grindrod offering new shares to Solethu, Calulo and a new empowerment partner.
The mechanics of the capital raising combines an accelerated bookbuild offering to qualifying investors and a specific issue of shares to a BEE consortium. Remgro Limited, which already has a 25% stake in Grindrod, has committed to submit an order of R800m into the book of demand, while Grindrod Investments will pitch an order of R250m.
Both Remgro and Grindrod Investments are not guaranteed participants in the book-build. Their orders will be scaled back if the placement is over-subscribed. After the bookbuild placement, Grindrod will issue new shares to a consortium of existing and new empowerment shareholders — raising up to R1.6bn.