It will not be surprising if Ethan Dube one day comes to be known as "Mr AltX". The CEO of investment firm Vunani is on the board of six AltX-listed companies in which Vunani has a holding.
Vunani listed on AltX last year. Dube is chairman of two AltX-listed companies and is on the board of another three on the JSE's main board.
From the outside it looks as if the empowerment holding company has found a niche in becoming a black economic empowerment (BEE) partner to companies in an overlooked market.
It is not quite that way. Dube admits that it was a coincidence that Vunani started investing on the JSE's junior board. "We were not really looking at AltX-listed companies," he says.
Dube says the fact that many of these companies would decide to look for further funding on AltX was unforeseen. Looking back, it is easy to see why so many of Vunani's companies have chosen to list on AltX.
The junior board was meant to help up-and-coming companies find funding and Vunani had taken a view three years ago that it would invest in well-run medium-sized companies in the infrastructure, construction and mining sectors.
It saw these sectors as dynamic areas in the economy and wanted to find a way to get into them. "We are after growth," Dube says.
Vunani's AltX investments are not glamorous, high-profile shares but its view of the economy has since been vindicated by the boom in construction and government's plan to spend billions on upgrading infrastructure.
This spend is unlikely to slow down, despite a series of interest rate hikes over the past year. And many players in the construction industry are expected to enjoy an upswing in the sector stretching past the 2010 soccer World Cup into 2015.
Vunani's investments in these sectors are already starting to pay off. Steel merchant Alert Steel had revenue rising 42% to R564,2m and operating profit up 69% to R38m in its aggregated figures for the year to end-June.
Geotechnical and piling specialist Esor had its revenue jump 516% to R474m for the six months ended August and its share price trebled to 870c/share last year.
Vunani's investments in the mining sector, like that of mining services group TWP, have also paid off with the sharp growth in commodities because of the strong demand for base metals.
These companies gain by having an empowerment partner, which allows them to bid for lucrative state tenders and from companies that are bound by empowerment codes.
But Vunani brings a lot more to these companies than empowerment qualifications. It is well connected to the SA financial markets and is able to introduce these companies to possible funders and help them make acquisitions.
Vunani's relationship with local financiers runs deep. It was formed when managers at African Harvest Capital bought it from parent company African Harvest in 2004. Dube says Vunani has about 60 professionals that assist these businesses.
Dube, a former CEO of African Harvest Capital himself, has a solid reputation in the financial sector. Many of the businesses that Vunani invests in are family-owned companies. He says the group has helped them adapt to a more corporate structure.
He says despite the family roots of these businesses, the people running them usually adapt well to being in charge of a listed company.
Vunani likes to have some control over its investments. That is why it likes to take between a 26% and 40% holding in a company.
Dube says Vunani is open to taking a 100% holding in a company but it has to be something it can relate to in the financial services sector.
Recently, Vunani found such a match. It acquired certain corporate finance and treasury assets of Corporate Solutions - the major shareholder in Exchange Sponsors, which is an adviser to AltX-listed companies - in a R90,75m deal.
Like Vunani, Exchange Sponsors has made a name for itself on AltX. It has listed 24 companies on the exchange and transferred four companies to AltX since 2005.
The deal is complex. Exchange Sponsors founder Wessel van der Merwe, along with five JSE-approved executives and senior management, and some of its assets and the bulk of the contracts of Corporate Solutions will be shifted into a new advisory service under Vunani.
The treasury division of Corporate Solutions, Treasury Resources, has also been bought and will be transferred into Vunani Corporate Finance - a recent JSE-approved sponsor and designated adviser - and Vunani Treasury Resources.
The deal with Van der Merwe coincides with Vunani also taking control of 51% of the ordinary shares in pension fund administrator RFS Holdings.
RFS is a pension funds administrator, a home loans manager and provider of financial advisory services and life insurance benefits.
It was established in 1987 by Chris du Plooy, the current CEO.
Dube is upbeat about the two deals. "We will be able to generate further deal flow and cross-selling opportunities to existing business divisions.
"Our platform as the leading BEE financial services group will provide an excellent opportunity to the Vunani Corporate Finance, Vunani Treasury and RFS teams to access new business opportunities," he says.
Van der Merwe, who becomes an executive of Vunani Corporate Finance, also sees synergies coming from the deal. "With our exceptional track record in listings, mergers and acquisitions and corporate actions, Vunani Corporate Finance will become the leading BEE corporate finance advisory team."
The Vunani Corporate Finance executive team comprises Van der Merwe, Henk Engelbrecht, Esna Colyn and Stef Greef. This team has been involved in more than 30 listings in the past three years as well as high-profile empowerment deals and corporate finance transactions such as Enaleni/Cipla Medpro, Esor/Frankipile and WG Wearne/De Bruyn Sandwerke.
The deal with Corporate Solutions will result in Vunani paying R12m in cash and R57,25m in Vunani shares at a R1/share issue price.
The balance of R21,5m - also payable in shares - is dependent upon an audited profit after taxation of R19,5m being achieved for the year ending December 2008, and will be adjusted proportionately depending on targets achieved.
The R48,96m deal to take a holding in RFS is structured along similar lines.
