PSG Group and the Great Value Unlock

Karel Zowitsky
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This is one of the biggest news stories on the JSE that we’ve seen in a while, as PSG Group has taken the ultimate step towards getting rid of the investment holding company discount that has plagued the company and so many others just like it.

That step is to collapse the holding company structure altogether. Yes, PSG is planning to unbundle almost all of its assets and delist from the JSE.

Those who bought PSG as a discounted entry point into the underlying assets are smiling all the way to the bank, as the share price jumped over 30% in response to the news, before drifting lower over the course of the day to close 18.7% higher.

The assets to be unbundled are a 60.8% stake in PSG Konsult, a 63.6% stake in Curro, a 34.9% stake in Kaap Agri (subject to Zeder unbundling its stake in Kaap Agri), a 25.1% stake in Stadio and finally a 47% stake in CA&S, which will be separately listed on the JSE.

CA&S is the business you may not be familiar with. This is an FMCG business operating in several southern African countries. It is listed on the Botswana Stock Exchange and 4AX in South Africa. A JSE listing would now be added to that list, which makes me wonder about whether the 4AX listing will be retained.

In addition to the unbundled assets, shareholders would receive R23 per PSG Group share. Based on closing prices for the underlying assets on 25 February 2022, the value of unbundled investments to be received per PSG share is R90.94. Adding the cash consideration of R23 takes this to a total pre-tax value of R113.94.

This number will change based on movements in the share prices of the underlying assets, so you can expect ongoing volatility in the PSG share price. It closed yesterday at R97.15.

The tax consequences can get technical on deals like this. The position for most shareholders is that the unbundling will not attract any tax. The R23 in cash will be treated as a dividend and subject to dividend withholding tax.

Assuming the final decision to proceed is made, the next step would be the issuance of a circular to shareholders.

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