Robert Gumede's move to increase his Guma Group's stake in Gijima to 88.3% is raising questions as to whether he is moving to protect the company, or make it easier for another entity to snap it up.
Gijima announced the results of its recent rights offer during SA's traditional quiet period during the December break. The offer, which sought to raise R100 million, was fully underwritten by Guma, but failed to gain traction among Gijima's other shareholders.
In total, shareholders owning 49.9% of Gijima's stock took up the offer, but this includes Guma's combined 46.7% stake. As a result, this now leaves Guma with 88.3% of Gijima's shares.
Empowerment credentials
Gumede, who is Gijima's executive chairman and earned R1.6 million last year, says the outcome "represents a huge opportunity for Guma to position Gijima as the single largest black-owned listed company, with no encumbered shareholding - a first in South Africa".
Gumede, who also founded and controls the Guma Group of companies, adds Gijima can now broaden its empowerment ownership, "bucking the trend of most IT companies of Gijima's size, which are either white- or foreign-owned".
He continues: "The rights offer provides Gijima with a well-capitalised shareholder with extensive experience in Africa, to assist with a turnaround that is already yielding positive results and to pursue growth in the rest of the continent."
Making progress
Gijima has recently been through turbulent times, and is one-third through yet another three-year turnaround strategy. In the year to June, the company reported turnover lower at R1.5 billion, down from 2013's R1.8 billion, but trimmed its net loss from R294 million to R153 million.
However, the company has needed to roll over its R213 million debt, and has entered into a new deal with its financiers, pushing out the due date of the debt into equal tranches due between 2017 and 2020.
Despite the company's ailing position, Gumede has confidence in the company, noting Guma is a "committed and supportive shareholder with a long-term view of Gijima".
Suspicious minds
Independent analyst Paul Booth notes Gijima is Gumede's "baby" and his agreement to fully underwrite the offer - leaving his Guma entity in a controlling position - could well have been a move to protect the company from buyout.
"Gumede now has an even stronger hold; if someone wants to buy Gijima, they will have to buy Guma." Gijima is currently worth R107.9 million, which means the balance owned by shareholders other than Guma is only worth R12.6 million.
Booth notes Gumede could also buy out the rest of the company and take it private, as this amount is "peanuts", but doubts this will be the case as it would send out alarm bells in the government sector. This, he notes, is because it would be viewed as a "jobs for pals" scenario.
Nearly two-thirds of Gijima's revenue is derived from the private sector, with the balance from the public sector. Several years ago, government accounted for 40% of Gijima's revenue.
Booth notes Gumede's move could also be a way of making it easier for another company - which could be an international outsourcing firm - to buy Gijima because it would only have to deal with one entity: Guma. He notes there "may be a hidden agenda here" and Gumede's next move is anyone's guess.
"Gijima is his baby, but stranger things have happened."
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