An independent board has recommended to shareholders that they vote in favour of a takeover bid for Barloworld from Entsha and Saudi Arabian giant Zahid Group at an extraordinary general meeting on 26 February.
This was revealed in a circular distributed to Barloworld shareholders and published on the stock exchange news service on 29 January.
The circular also revealed that equipment supplier Caterpillar, of which Barloword is the sole distributor in southern Africa, is in support of the deal.
Barloworld is set to be bought by a consortium of investors, dubbed ‘Newco’, which comprises Entsha (51%), a company heavily linked to chief executive Dominic Sewela, and long-term shareholder Zahid Group (49%).
This would result in Barloworld’s delisting from the Johannesburg Stock Exchange (JSE) and becoming a privately held company.
Despite the involvement of the group’s chief executive in the consortium, Barloworld said it believes it has put sufficient conflict of interest safeguards in place. This included the formation of an independent board to evaluate the offer for the company.
It also included the establishment of a steering committee consisting of selected unconflicted executives, with the circular saying that “the chief executive has had no involvement in or influence over” the company’s assessment of the offer.
The consortium is offering R123.10 per Barlowrold share, representing a premium of 87% to the company’s 30-day average share price. This values the company at a total of R23 billion.
Following the implementation of the proposed transaction, Barloworld will retain its name and remain headquartered in South Africa.
An independent expert, Rothschild & Co., was appointed by the board to opine on the fairness and reasonableness of the offer.
It has concluded that the offer is fair and reasonable.
The independent expert has provided their valuation range, being R105.53 to R119.43 per share.
As a result, the board recommended in the circular that shareholders vote in favour of the scheme based on the independent expert’s opinion.
Chair of the board Lulu Gwagwa says the circular represents a significant milestone in the transaction process. It marks substantial progress towards the completion of the takeover.
It also marks a significant change for the company, which was founded in 1902 and became a corporate giant in South Africa, ranking 79th on the Fortune 500 at its peak in 1994.
After its centenary in 2002, Barloworld began disposing of some of its assets to focus on its core business. This marked the beginning of a transition away from growth to consolidation.
The company also came under increasing pressure from a decline in mining production in South Africa as policy uncertainty and threats of nationalisation limited investment in exploration and expansion.
Barloworld’s disposal of assets accelerated in 2006 when the company sought to continue its strategy of doubling the value of its business for shareholders by 2010.
It completely unbundled PPC Cement and Coatings, and both were eventually listed separately on the JSE. Barloworld also sold its Scandinavian car rental operations.
The trickle of disposals became a flood in the late 2010s when the company sold its Spanish equipment business and announced it would exit logistics in South Africa.
It also exited its motor retail business, selling the unit to NMI Durban South Motors. In 2021, it announced plans that by 2022, it would have sold its logistics business as well as its leasing business and car rental business.
The car rental business, which operated under the Avis brand in South Africa, is now listed separately on the JSE as Zeda.
Barloworld’s increasingly simple business, with a strong position in southern Africa, has made it attractive to foreign companies looking to invest on the continent.
In December 2024, the company announced it had entered into negotiations with a group of investors regarding the purchase of Barloworld.
“Barloworld has entered into negotiations with a consortium of investors, acting through a newly established special purpose vehicle, which, if concluded, will result in the consortium making an offer to acquire all of the issued ordinary shares in Barloworld,” it says in a statement.
The investors are being led by the Saudi group, Zahid, a distributor of heavy equipment machinery in the Middle Eastern nation.
It bought shares of Barloworld four years ago. One of its units, Zahid Tractor and Heavy Machinery, owns 18.9% of the South African company.
On 11 December, a consortium, including Zahid and Entsha, an entity linked to Sewela, made an offer of R120 per share to buy the company. – Barloworld/
Stay informed with The Namibian – your source for credible journalism. Get in-depth reporting and opinions for
only N$85 a month. Invest in journalism, invest in democracy –
Subscribe Now!