African Rainbow Capital’s offer to shareholders analysed

Patrice Motsepe’s African Rainbow Capital Investments (ARCI) plans to delist from the Johannesburg Stock Exchange (JSE), offering shareholders R9.75 per share.

ARCI is incorporated in Mauritius, and its principal activity is to act as an investment pooling vehicle.

It invests indirectly as the only limited partner in the ARC Fund, which in turn invests in a diversified portfolio of unlisted and listed investments.

ARC Investments is majority owned by African Rainbow Capital (ARC), which is, in turn, 100% owned by Ubuntu-Botho Investments (UBI).

ARC, not to be confused with ARCI, is a fully black-owned and controlled company founded in 2015 by billionaire Patrice Motsepe.

ARC Investments was listed on the JSE on 7 September 2017 at R8.50 per share. Since then, investors have experienced a bumpy ride.

The ARCI share price declined to around R2.50 in March 2020 and then increased to around R9.50 by December 2024.

The ARC management team has consistently complained that the share is trading at a significant discount to its net asset value (NAV).

In October 2023, ACR co-CEOs Johan van der Merwe and Johan van Zyl said the management and the board considered whether there is value in being listed.

They highlighted that they would consider delisting ARCI should the discount to the company’s net asset value remain excessive.

They repeated this view last year, which has now come to fruition with an announcement that ARCI plans to delist from the JSE and A2X Markets.

It said almost all of the African Rainbow Capital Investments shareholders are South African, and there is limited liquidity in the ARCI shares.

“The ARCI share price also does not reflect the true value of the investment in the ARC Fund and trades at a discount to the net asset value of the ARC Fund,” it said.

Simply put, African Rainbow Capital Investments shareholders do not receive the actual value of their investment.

“It is anticipated that the offer will result in a return of value for investors,” the company said in a press statement.

Offer to ARCI shareholders

African Rainbow Capital offered shareholders a delisting price of R9.75 per share, a premium of 12.6% to the closing price of R8.66 on Friday, 14 March 2025.

The ARC offer also represents a 21.0% premium to the 30-day volume weighted average price of R8.06 per share.

The R9.75 per share offer puts ARCI’s delisting value at R14.8 billion, which represents a 11.7% premium to the 17 March closing market cap of R13.3 billion.

However, the offer is a significant discount to African Rainbow Capital Investments’ ARCIs intrinsic net asset value (INAV).

ARCIs stated that the business has an intrinsic value of R12.78 per share, translating into a valuation of R19.4 billion.

ARCI’s INAV increased by R2.5 billion in the past year from R16.9 billion to R19.4 billion. Rain’s intrinsic valuation increased by R2.75 billion to R25.9 billion, making it the biggest contributor.

This means that the offer to shareholders, which translates into a valuation of R14.8 billion, is 23.7% lower than the INAV.

Simply put, although the offer to shareholders is higher than its share price, it is a significant discount to the company’s INAV.

ARCI structure