Datatec, the group that owns the technology businesses Westcon and Logicalis, set out to hand R7.05 billion back to its shareholders, R29 for every share. Most of them asked for something else.
The money came from a deal around Westcon that TechCentral says valued that business at $950 million, and Datatec chose to return about $435 million of the proceeds as a special dividend, a one-off payout on top of the usual ones. The deal closed on 4 August.
How a dividend turns into shares
Shareholders were offered a choice. They could take R29 a share in cash, or take about 57 new Datatec shares for every 100 they already held. A share taken instead of cash is not money leaving the company: the profit that would have been paid out stays on Datatec's books as share capital instead.
The shares won. Shareholders who chose cash will get R2.28 billion between them, about a third of the total, and Datatec issued 94.3 million new shares in place of the other R4.78 billion. TechCentral puts the issue price at about R50.63 a share, the recent average share price with the dividend taken off.
Chief executive Jens Montanana did not get much say in it. Under the financing agreement attached to the deal, Datatec had to make sure he took shares on about 90% of his holding. He told TechCentral he now holds more than 20% of the shares in issue.
Why the earnings numbers disagree
More shares means every rand of future profit gets split more ways. TechCentral works out that the new shares lift the count by almost 40%, although Datatec also keeps the R4.78 billion it did not pay out.
The day after the payout results, Datatec said what the six months to August looked like, and how good that looks depends on the measure. Its preferred figure, underlying earnings per share, which leaves out items such as writedowns, deal costs, restructuring and share-based pay, should come in up by more than half. Headline earnings per share, the measure every JSE company has to report, rises by only 0.5% to 7.3%.
The businesses underneath had a strong half. Westcon and Logicalis International both reported their best first half on record at the operating level, while Logicalis Latin America had another weak one, propped up by tax credits it can claim back.
Full interim results are due on or about 29 October. Every rand Datatec earns from here is split across a far bigger pile of shares, and Montanana's pile is among the ones that grew.
