Johannesburg - Local technology company Gijima [JSE:GIJ] plans to delist from the Johannesburg Stock Exchange (JSE) after its share’s price has been decimated in recent years.
The move to delist comes after Gijima chairman Robert Gumede made an offer on Tuesday to buy out the remaining minority shareholders through his company Yebo Guma Investments.
Gijima’s share price has been decimated from a high of R340 in February 2011 to just R1.50 this year.
A poor financial performance has hurt Gijima which experienced a 50% tumble in its share price in April 2013 after reporting a loss of R23.73m for the first half of that financial year. And for the year ended 30 June 2014, Gijima posted a full year loss of R152.4m for the period.
The company has also been dragged down by a legal battle with the State Information Technology Agency (Sita) as Gijima has tried to hang on to a multimillion-rand Department of Defence contract. Sita says the contract was awarded in contravention of the constitution and the agency’s procurement rules.
A three-year turnaround plan has attempted to salvage Gijima, which employs over 2 000 staff.
But billionaire businessman and ANC benefactor Robert Gumede has in the meantime sought to buy out all the shares of the company by offering remaining shareholders R2.20 per share in cash, almost double Gijima’s closing share price on Tuesday.
Guma entities have previously increased their ownership of Gijima’s shares from 46.7% to 88.4% leaving the company with a remaining free float of 11.6%.
“Given the small remaining free float and the current status of the Company’s turnaround which is ongoing, Guma believes it is in the best interests of the company to be held 100% by the Guma Entities and to delist, thereby enabling it to complete the turnaround in an unlisted environment,” read a market announcement from Gijima on Tuesday evening.
Regulators have to approve the deal.
But it already has the backing of asset managers such as Allan Gray, Investec and Futuregrowth which collectively manage an aggregate 3 010 430 offer shares - or 43.4% of the total in Gijima - to either vote in favour of the resolutions required to approve the scheme on behalf of their clients.
Meanwhile, non-executive directors Malcolm MacDonald and Jacobus van der Walt, who own a combined 2,7% of the offer shares, have also agreed to vote in favour of the deal.
UPDATE: Analyst reaction
Local ICT analyst Paul Booth told Fin24 "there are always positive and negatives to any proposed delisting".
"The positives are that it allows the company to do what it needs to reorganise or whatever for the future without shareholder interference. The latter normally want quick results and a turnaround often takes time. Also financial information doesn’t need to be disclosed as a private company and this avoids possible criticism and as a private company it can undertake acquisitions or be acquired itself without too much external interference," Booth said.
"On the negative side, Gijima may find it more difficult to do business in the public sector and thus have to rely on contacts etc," Booth said.
Booth added that Gijima may take longer win contracts because information about the company will no longer exist in the public domain.
He also said that Gijima's dealings with the Department of Home Affairs could have contributed to the company's downfall.
In 2011, the Department of Home Affairs settled with Gijima out of court for the loss of R389m regarding a contract.
Gijima won the contract in 2007 but failed to deliver on an integrated electronic database for the department to beef up security and speed up processes.