OVER THE PAST FEW weeks proposals to delist two small cap companies from the AltX have been tabled. That development wasn’t unexpected. Finweek has previously predicted an inevitable trend towards delisting, with numerous companies trading at insulting earnings multiples and hefty discounts to intrinsic value.

What’s surprising is that both delisting proposals – involving Dynamic Technology Holdings (DTH) and ABE Construction Chemicals – haven’t (at least to our knowledge) caused an outcry in the market. Delistings are normally fairly contentious. There’s usually suspicion the entity or person making the offer to buy out shareholders knows substantial value can be unlocked in the company away from the eyes of public shareholders.

The market is also prone to cynicism when companies that have only recently been listed – DTH and ABE were both listed in 2007 – suddenly opt for a delisting. Float in the boom, sneak off in the gloom… The fact that neither scheme proposed by DTH and ABE sparked an outcry might suggest the respective minority offers and delisting proposals are being viewed as (gasp!) reasonable.

ABE’s buyout proposal is a R200m transaction proposed by Chryso, offering shareholders 200c/share to walk away from a company that’s been one of the better building materials specialists listed on the AltX. The buyout price was pitched at a 27% premium to the weighted average price of ABE’s shares (153c/share) in May and still represents a tidy premium on the ruling share price. Interestingly, the offer price is being pitched slightly higher than ABE’s pre-listing share placement price of 195c/share. Shareholders representing 43% of ABE’s issued shares have already given irrevocable undertakings to accept the offer.

Technology specialist DTH’s R30m buyout offer is pitched at 105c/share, representing a massive 50% premium to its average weighted share price for May of 70c. Of the DTH shares party to the offer, 63% of shareholders have indicated a willingness to accept. DTH’s buyout offer, like ABE’s, is pitched slightly ahead of the pre-listing placement price of 100c/share.

One market source – recalling events that followed the late Nineties listings boom – says the first wave of delistings following a new listings rush often sees fairly decent offers for promising businesses.

While shareholders may have been happy to bail out at seemingly fair prices, you have to wonder if shareholders would have been better off still holding shares in delisted late Nineties darlings like Nando’s, First Lifestyle Holdings, Gray Security or Fedics.

Certainly, ABE appears to be a business with solid longer-term prospects. Interim earnings – backed by decent operational cash flows – came in at R15m for the period ended November 2009. While it tends to earn most of its keep in first-half trading there’s no doubt that in a more robust economic clime the business could push bottom line close to R30m. Full year earnings to end May 2009 were R25m, which means the buyout offer is being pitched at a historical earnings multiple of only eight times.

DTH – also a cash-generative business – posted bottom line profits of around R7m in the year to end-February 2010, equating to earnings of 12c/share (basic) and 14c/share (headline). That means the DTH offer is being pitched at an earnings multiple of 7,5 to 8,75 times. But it’s probably worth noting 2010 wasn’t a great year for DTH and the previous financial year saw earnings of 17,5c/share and a dividend of 3c/share.

Finweek reckons while the buyout offers look reasonable, shareholders will be saying goodbye to two businesses with attractive longer-term prospects. The prevailing bear market probably mutes enthusiasm for shareholders’ resistance. But some heel-digging might well yield a few more cents.