Whether this is a prudent move remains to be seen - especially after one of BK One’s investment partners was caught up in tragic events that questioned investment modus operandi.
On July 26 Herman Pretorius - who operated an alleged ponzi scheme via Relative Value Arbitrage Fund - shot Williams (his former business partner) before turning the gun on himself. Apparently Pretorius and Williams fell out over an investment.
BK One and Basileus (and specifically Williams) enjoyed a close working arrangement in that potential investments for the former were sourced from the latter.
Now it seems BK One will take over select assets controlled by Basileus Capital. BK One recently advised its shareholders that it was in talks with Basileus Capital and its business rescue practitioners regarding the targeted acquisition of the shares in a select number of assets.
According to a notice to shareholders, BK One said the target assets comprised seven investments - three of which the company already had an interest in. The first of the ‘familiar asset’ deals sees BK One acquiring another 86.3% stake in aquaculture business Pure Ocean (in which it already has an existing 7.7% stake). Pure Ocean recently opened its first wholesale and retail outlets in Cape Town.
BK One is also negotiating the purchase of Mossell Bay-based Tor Construction (a roadworks specialist that is facing liquidation claims) and is presumably also looking to increase its stake in specialist alloy business Avalloy (although no specific mention has been made of this asset).
The new assets being acquired are wide ranging, and include a 76% stake in Cash Connect (a physical cash management service), a 77% stake in Kawuzela Connect (which offers internet access services), a 98% stake in Lefatse Minerals (a West Coast-based heavy metals explorer currently under business rescue), 100% of Toric (an oil infrastructure development specialist), 94% of Burgan Oil (fuel depots, pipelines, gantries and berths) and 82% of Agri-Tech (a technology service provider to the farming sector).
BK One - headed by former Old Mutual executive Dean Richards - said that through its historic co-investment relationship with Basileus Capital it had developed an understanding of the potential value of the Target Assets.
“In the board’s assessment, (we are) ideally placed to extract full value from these Target Assets over their respective investment cycles.”
CBN will be interested to see how BK One funds the proposed acquisitions since last we looked there was only R34m in cash on the balance sheet.
For instance, buying out Pure Ocean would require a chunk of cash considering the carrying value of BK One’s 7% stake was valued at over R60m.
That would mean Pure Ocean was valued at roughly R800m compared with BK One’s last stated total value of around R230m.
It seems likely BK One might tap the market for further funding, although - to date - there has been scant investor interest in its preference shares listed on the JSE.
BK One, however, has signalled the possibility that it might restructure its share capital - “depending on the settlement mechanism of the proposed acquisition”.
In addition, the acquisitions and subsequent restructure could see BK One increasing its staff complement to bring in additional, relevant skills and capacity.