Litha Nyhonyha’s group Regiments Capital continues to fly high with news that it was set to earn a 32.5% stake in JSE listed engineering group B&W Instrumentation and Electrical in what was described as a black economic empowerment (BEE) partnership.
The AltX listed B&W announced recently that Regiment Capital will subscribe for about 102 million B&W ordinary shares at a strike price of 58c per share. The strike price represented a 11.1% discount to the 30 day volume weighted average price.
It looks like B&W could use a strong BEE player as it has been struggling over the past few years and has ordered a rationalization process. It returned to profitability in the year ended August but still experienced shrinking revenue. In those results CEO Brian Harley said the decrease in the top line was intentional as the group curbed project work in order to focus on successful consolidation within the organisation to position for future growth. Harley added that the group will focus on executing its aggressive five-year strategic growth plan starting in earnest from 2014. If he gets this right and with the partnership of the heavy weights that make Regiments Capital, B&W will be well positioned to feed from South Africa’s massive infrastructure development programme.
Regiments Capital is a BEE styled boutique financial services house and investment holding company led by heavy weights Nyhonyha, Niven Pillay and Eric Wood. Regiments Capital seems like a highly successful business which has however managed to fly under the radar until recently when it faced allegations of corruption from the Democratic Alliance in relation to the management of a sinking fund for the City of Johannesburg. Regiments Capital has denied these allegations.
The B&W statement said “The specific issue will result in 32.5% of the issued share capital of B&W being held by Regiments Capital for a minimum period of 5 years”.
The B&W statement said BBBEE credential are crucial in the group’s markets especially the mining industry. “This will ensure the retention of existing work in the mining industry, which is of paramount importance given B&W’s exposure to this sector”.
The group said the deal will also deliver “Enhanced access to government, parastatal and state-funded markets, through better levels of BBBEE certification of the Company, due to the enhanced black equity”.
The group also spoke of an opportunity to leverage off Regiments Capital’s exposure to the commercial and industrial sectors.
In the B&W statement Regiments Capital is described as a black-owned diversified financial services company, focused on providing investment banking, advisory services, property development as well as holding a portfolio of strategic investments in various sectors, including infrastructure, healthcare and resources. Regiments Capital website says the group holds various strategic investment stake in portfolio which includes Capitec Bank, +MCare and Burlington.
According to Nyhonyha, Regiments Capital’s Executive Chairman, the group is investing in B&W to broaden its base of strategic investment assets which include financial services, healthcare, infrastructure and resources. “We are excited about B&W’s prospects and believe that it will fit nicely into our portfolio of assets,” said Nyhonyha. This deal further indicates our confidence in the Government in rolling out the infrastructure projects that our country so desperately needs to meet service delivery backlogs. We continue to hold the view that infrastructure spend will underpin the growth of our economy”.
“This is an excellent opportunity for us to diversify into a market sector that has enormous growth potential over the next few years.” According to B&W CEO, Brian Harley, Regiments Capital’s Level 1 B-BBEE rating will sharply improve B&W’s own B-BBEE credentials, enabling it to tender for more government and corporate business.
“It has been the intention of the board to increase the group’s B-BBEE shareholding and to raise new equity capital to improve B&W’s working capital position, such that the group can position itself for future growth,” said Brian Harley “Apart from Regiments Capital’s shareholding markedly improving our B-BBEE profile, there will also be an opportunity for us to leverage off their exposure to the commercial and industrial sectors.”
Regiments Capital was established in the 2000’s under the leadership of Nyhonyha who is a highly connected chartered accountant. His profile includes being part of the establishment of Thebe Investment Holdings together with former business partner Vusi Khanyile. Pillay and Wood are giants in their own right within the financial services industry.
Pillay’s profile in Regiments Capital website says he was born in KwaZulu-Natal and completed his studies at Princeton University in the United States in electrical engineering and computer science. He returned to South Africa in 1991 and began his career as a management consultant at Andersen Consulting. He moved Standard Merchant Bank and had a short stint at Investec. He has also worked for ABN Amro, UBS in London and WIP Capital and in 2004 established Maya Capital. “This business became a substantial part of the framework of the Regiments Capital business structure”.
Woods is said to have completed his articles before starting his career as a trainee bond dealer at stock broking firm, Frankel Kruger Vinderine. He joined Investec Bank in 1988. He served as chairman of the Primary Dealers Association and was a member of the Bond Exchange EXCO in 1999 and 2000. “In 2002, Eric left Investec to set up the infrastructure of a hedge fund business for Credit Commerciae and attracted capital for its first hedge fund. He was involved in the trading and operating of this fund until he left in 2004 to co-found Regiments Capital”.