By: Jalpa Bhoolia
Coronation Fund Managers Limited - Odd-lot Offer
Coronation Fund Managers Limited (CML) confirmed an odd-lot offer to shareholders of the company:
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The offer was approved at the company's annual general meeting on 27 March 2024.
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The company will proceed with the implementation of an odd-lot offer to shareholders holding less than 100 ordinary shares in the company.
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As at 9 February 2024, there was a total of 4 005 odd-lot holders, comprising 22% of the total number of shareholders in the company. Conversely, the total number of shares held by the odd-lot holders comprises 83 349 shares, representing 0.02% of the total issued shares.
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These smaller holdings result in recurring administrative costs being disproportionately large relative to the small percentage of the total shares in issue, which negatively affects all shareholders.
Shareholders that qualify for the odd lot offer may:
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Sell their holdings for 3 361.91281 cents per share - being a 10% premium to the 30-day VWAP of a CML share at the close of business on Monday, 8 April 2024 (default action); or
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Elect to keep their shares.
NB! The default action is to sell. It is very important that shareholders who wish to retain their CML shares specifically elect to do so.
If an investor accepts the offer or makes no election to retain their shares (default action), the subsequent disposal of their CML shares will trigger a tax event. The offer consideration of 3 361.91281 cents per share will be regarded as a dividend and will be subject to Dividends Tax, if applicable.
An election to retain their shares will result in no tax event for the shareholders.
FNB Stockbroking and Portfolio Management View
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We prefer Option 2. The share price is now ~9.5% below the offer price and investors will have the opportunity to exit a relatively small exposure without incurring brokerage costs. A Dividends Tax impact could make a sale less worthwhile, however. We also see reasonable upside potential in the share price on a total return basis.
