The Finance Ghost: The deal machine hums into life

Corporate mergers and acquisitions never cease to capture the imagination of investors. We imagine exciting deal negotiations, swashbuckling dealmakers and perhaps even a movie along the way.

As always, the reality isn’t quite as exciting as Hollywood (or Nana Banana Pro, these days) would have us believe, but it’s still pretty cool. I sometimes miss my days of advising on these transactions.

The hit rate on deals is patchy to say the least. Some are successful, while others are disasters. It’s not uncommon to see a period of “strategic” dealmaking that turns out to be little more than the opportunistic whims of a CEO who isn’t adequately reined in by the board and the shareholders. This behaviour almost always comes full circle, ending in strategies to “unlock value” and “return to core operations” by selling off the things that were previously acquired.

As a useful reminder of what happens when you focus on your core business after you’ve cut away all the fat, we saw an update from Grindrod this week, where HEPS from continuing operations increased by between 15% and 20% in the year ended December 2025. This reflects the benefit of their pit-to-port strategy, along with the newfound focus at the group after many painful years of owning unrelated and unattractive assets. This is one of the best examples of the full life cycle of an acquisitive strategy.

Also in the past week, we saw a few examples of significant deals, ranging from business-as-usual property deals through to rather spicy acquisitions in payments and telco infrastructure. Will the latest acquisitions end up requiring a Grindrod-style value unlock down the line, or will they prove to be good decisions?

We start with the lowest-risk examples: deals in the property space.

Sirius raises now, Vukile may raise later

Real Estate Investment Trusts (REITs) are an exception. They can (and do) still get it wrong on acquisitions, but they have no choice but to regularly buy properties in the pursuit of growth. There is no other way to achieve scale, as each individual property only has so much potential upside. You can’t scale an individual property into a national brand…

The way that acquisitions are funded is what varies. When a fund is small or doesn’t have a great reputation, they need to “recycle capital” by selling existing properties and using the proceeds to buy something new. If they can do that a few times and demonstrate successful value creation, they stand a chance of moving into the far more lucrative category: funds that can raise equity capital.

Sirius Real Estate is clearly in that bucket, evidenced by the ease with which they raised around R1.7-billion for property acquisitions in Germany. They managed to raise at a premium to the 30-day volume-weighted average price (VWAP), so they didn’t even need to give investors a discount on the shares to entice them to support the capital raise. This is an incredible show of faith by the market in the strategy being followed by the company.

Another good example is Vukile Property Fund, a strong performer that is taking advantage of conditions in Iberia rather than Germany. They raised R2.65-billion in October 2025, and they are hungry for more, as they believe that there is currently a window of opportunity in Iberia that they need to take advantage of. As they’ve exhausted their authority to issue new shares until the next AGM, the company is calling a meeting to ask shareholders for authority to issue another 9% of current shares in issue. This works out to around R3.2-billion at current prices, so they are clearly planning some big moves.

And if the support for the previous capital raise is anything to go by, they won’t struggle to get the support.

Business unusual: MTN to acquire IHS

In the telcos space, much of the capital allocation activity of the past decade was based on separating the tower infrastructure from the telco operators. One is a property asset and the other takes on operating risks, so the risk/return profiles are very different.

But in today’s world, where hyperscalers are building AI models and associated data centres, MTN seems keen to join the trend of bringing operations and infrastructure together once more. They have made a play to acquire the 75.3% of IHS that they don’t already own. This would give them control of 28,700 towers across five key markets in Africa, serving 10 out of the 13 network operators on the continent.

To be clear, the towers would still have external customers. Not only is this needed for the economics to still work, but I can’t see that regulators would allow MTN to shut out competitors by cancelling their tower leases.

Assuming shareholders of IHS approve the transaction, the deal will see $2.2-billion in cash changing hands, of which $1.1-billion is on the IHS balance sheet. The other $1.1-billion is coming from MTN’s balance sheet. We’ve seen MTN get themselves into trouble before with deals in Africa, so they are banking on the encouraging macro environment continuing for the foreseeable future. Nothing ventured, nothing gained.

The valuation of IHS is such that MTN describes this as an earnings accretive deal. That may be true, but it’s still an unusual capital allocation decision. MTN is playing the long game here with its infrastructure strategy.

Araxi rolls the dice — but I like it

Araxi has two main segments. The payments business is the good one, so the market seems pleased with Araxi’s decision to make a R1-billion acquisition in that space. They are acquiring 80% of Pay@, a payments business with a track record of nearly two decades and a significant footprint across South Africa and neighbouring countries.

Pay@ is growing quickly, boasting a revenue compound annual growth rate (CAGR) of 22% over the past three years. They are profitable, with ebitda for the six months to August 2025 of R72.4-million. And perhaps best of all, Araxi is paying a decent Price/Earnings multiple for the acquisition, working out to around 12.5x if you simply annualise the interim numbers.

It’s a Category 1 deal, so Araxi shareholders will need to give it their approval. I can’t see it being an issue, as this is a sensible step forward that plays to Araxi’s strengths. The only negative is that they are taking on R800-million in debt to make it happen, so the days of Araxi having a lazy balance sheet in a net cash position are over. DM