The Competition Commission has recommended that the Competition Tribunal approve the acquisition of Barloworld by a management-led consortium and a Saudi Arabian investor group, subject to conditions.
The proposed transaction, valued at about R23bn, involves a management-led consortium under CEO Dominic Sewela and Gulf Falcon Holding — a unit of the Saudi-based Zahid Group — acquiring all Barloworld’s ordinary shares, which would result in the industrial major’s delisting.
The acquisition will result in Barloworld becoming majority black owned.
Barloworld is a diversified industrial group that operates in sectors including mining, construction, marine, and electrical power generation. It supplies new, used and rentable industrial equipment, including Caterpillar products, and produces starch and related products for industries such as food and beverages, pharmaceuticals and paper manufacturing.
The company’s shares are widely held and it is not controlled by any single shareholder.
The commission’s review concluded the transaction was unlikely to substantially lessen or prevent competition in any market.
To address public interest concerns, the parties agreed to conditions including a phased increase in ownership by historically disadvantaged people and employees, provided certain transaction obligations are met. The transaction is not expected to result in job losses or changes to working conditions.
The transaction also preserves existing broad-based BEE structures. The Khula Sizwe broad-based vehicle, which benefits more than 29,000 majority black shareholders, including current and former Barloworld employees, will be maintained.
The Barloworld Empowerment Foundation, which holds 3.5% of Barloworld shares valued at about R750m and directs at least 60% of its economic benefits to black women, will continue its economic development and corporate social investment initiatives after the transaction.
In April, after initial resistance, the Public Investment Corporation (PIC), Barloworld’s largest shareholder with a 22% stake, pledged its support for the offer.
Initially, the PIC, alongside shareholders holding more than 60% equity in Barloworld, held back support over fears that CEO Dominic Sewela’s dual role as CEO and a key figure in the acquisition team presented a potential conflict of interest.
The offer values Barloworld shares at R123.10 apiece, comprising a cash scheme consideration of R120 plus a declared dividend of R3.10.
The timeline for the transaction includes a deadline for fulfilling all necessary conditions, known as a long-stop date, set for September 11. The deadline for acceptance of the standby offer has been extended to June 30 to allow shareholders additional time to respond, after delays in some shareholders tendering their shares.
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