BUSINESS DAY TV: Stellar Capital Partners sets its eyes on more private equity opportunities
PETER VAN ZYL is CEO of Stellar Capital Partners.
BUSINESS DAY TV: Cadiz Management has acquired its founder stake in the investment company while Stellar Capital Partners has acquired a strategic shareholding, 16.45% to be exact, primarily from Blackstar, and joining us on the line now is Peter van Zyl, CEO of Stellar.
Peter before we get into the details of the transaction and the merit or the value of the deal that we are actually looking at here, give us a better sense of Stellar itself because you’ve actually been born from ConvergeNet, in fact only having changed your name last Thursday?
PETER VAN ZYL: That’s quite correct … we embarked on a change in the business strategy midway through last year, converting the business from a technology based company into a private equity company. We’ve raised nearly R150m worth of capital, and did five acquisitions and that all culminated in January when we had a shareholder meeting to approve all those transactions, and we now sit with R560m net asset value business as a platform to take private equity opportunities.
BDTV: As a listed investment holding company this looks like it’s your first transaction or asset you’ve purchased since your renaming and you’ve mentioned that you’re trying to move to investment companies’ portfolio or branding from a computer services position … what’s your game plan here?
PVZ: Our normal game plan at Stellar is to look at businesses where we feel there are a few key attributes that attract us. One, we’d like to see management having a stake in the business. We like to feel that we can add some value in that investment whether it be a corporate finance strategy, an M&A (Mergers and Acquisitions) strategy, a capital raise, some direct active investment strategy with the business. And of course if there’s a background by some of our executives in those areas then of course that attracts us even further. I think this latest one really was a culmination of a few of those, being management getting involved and also financial services being an area that we’ve been interested in for a while.
BDTV: Okay so let’s tackle that first one, why a 16.45% stake in Cadiz, what’s the rationale behind that transaction and what muscle does that actually give you to implement change, what sort of influence are you going to have within that Cadiz stable?
PVZ: Our influence will be bigger than our stake. We fortunately in one of other investee companies, Tellumat have the same empowerment partners, who currently hold 15% in Cadiz. We also have a link, although a binding link back to some of these management teams including Robbie Gonsalves who has led the consortium which bought just over 20% three or four weeks ago. So between us we have a sizeable stake. At Stellar we cautiously moved in there. We negotiated a stake from Blackstar. We must consider what they’ve done as very hard work over the last six months in restructuring the cost base of the business and we will hopefully take this business forward with management and hopefully with our expertise and our skills into the future.
BDTV: Of course the kind of commitment you’ve now ploughed in here speaks to an extent to the backing from your end of management that’s currently in place and the kind of change that they’ve been implementing as well. There’s been much focus on strategic change within the business. It’s already initiated board changes, a thorough review of the business has led to some downscaling on the size of staff for example, so how much further to go in that process before you’re actually sitting pretty close to the bone?
PVZ: There’s a large chunk that’s already taken place. A number of the strategic decisions which were taken actually by Blackstar investing in the business in November, have been implemented. There is still some way to go but a core chunk of that cost cutting process and restructuring process has happened. We need some time over the next three to six months to implement some further changes but it’s really acting on what’s already happened in the business. We then think the business is in a nice platform for a growth spurt in the next few years.
BDTV: Does growing of your stake fit into your longer term objectives?
PVZ: We certainly wouldn’t be shy to take further investment in increasing our stake in the business and that will depend on the opportunity and the pricing around what we can get our hands on.
BDTV: Earlier you mentioned that this is an entry point into financial services but speaking to one of the points you raised as well where you’ve spoken about a diversification of this initial portfolio, what other sectors are catching your interest?
PVZ: For us financial services and then obviously technology are two key areas because we understand those well. We have some smaller investments in the mining space. A chunk of that is in rehabilitation of mines, another chunk is in some exploration. We tend to stick to our knitting in the longer term so we like assets which we understand. Financial services and technology are certainly large areas for us at the moment but we will look around and see if there is opportunity. Key for us is that it meets those criteria, management are investors, we feel we can add actual active value to our underlying investment and we have the expertise and skills in house to do that.
BDTV: And if it comes at the right price…