(1888PressRelease)
May 19, 2009 - At Mondi's AGM last week, Ramaphosa and joint chairman Sir John Parker were asked to "bring Mondi home" by cancelling its UK listing and trading exclusively on the JSE.
The paper company didn't have a choice where to list in 2007 when it was unbundled from the dual-listed Anglo American. Like Anglo, Mondi shares were split into London-listed Mondi Plc (with a secondary listing in SA), and the JSE-listed Mondi Ltd.
At the AGM, Opportune Investment's Chris Logan told Ramaphosa there was "value in getting rid of the dual-listed company structure" and "choosing the stock exchange that gives you the highest rating which, from the numbers, will be the JSE ".
Logan's complaint is that since listing, Mondi Plc shares have done worse than Mondi Ltd. Whereas one Mondi Plc share was equal to one Mondi Ltd share on July 2 2007, a Mondi Ltd share would now buy you 1,5 Mondi Plc shares. Since listing, Mondi Ltd has lost 53% on the JSE, while Mondi Plc has lost 64%.
So, Logan asked, why not jettison the UK listing? It'll be cheaper to keep a single listing, and the stock will effectively be worth more on the JSE.
But Parker said Mondi would not scrap the dual listing.
Parker said the London listing "allows [shareholders] to retain their SA heritage, but provides access to a broader investment market".
CEO David Hathorn said "a number of shareholders" were worried by this price difference, but said "our advisers tell us this is mainly due to tighter liquidity in the Mondi Ltd share, which in turn may be due to the limits imposed on foreign investment by SA institutions".
This debate has been brewing for months. In March, Logan wrote to Ramaphosa saying Mondi was a "prime candidate" to unify its London and SA listings and move its main listing to the JSE. "It appears as if SA investors are far more optimistic on Mondi than their international colleagues," he said.
On April 23, Ramaphosa wrote back saying that while uniting the listings "might bring some benefits, [we] are not convinced it will be in the long-term interests of shareholders". For one thing, Ramaphosa said, abandoning the UK listing would mean Mondi's share would be removed from LSE indices.
Mondi isn't likely to do anything dramatic soon to close this value gap, given the tortuous environment for paper firms. Last week, Mondi said operating profit for the three months to March was "significantly below" last year's numbers.
Norman Brett, a shareholder who inherited his Mondi shares from Anglo American, asked the obvious question: "Do I keep these shares or sell them?"
As newspapers are folding faster than caffeine-addicted origami makers, it was a pertinent question. But Mondi replied that a large chunk of its profit came from packaging and also that since computer use was growing globally, more people were printing documents.
http://www.mondigroup.com
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