Infrastructure and mining services group Aveng has entered into a sale agreement to dispose of the last remaining significant asset that formed part of a disposal strategy dating back to 2018, Trident Steel, for R700m.
The deal, which still requires regulatory and shareholder approval, will see Aveng finally rid itself of the noncore asset to focus on its key businesses.
“This is the last big piece of our strategy jigsaw that will fall into place,” Aveng CEO Sean Flanagan told Business Day.
“But in fairness, we have got a much better price, a much better deal all round than any of the potential offers that we got previously,” he said, adding that Aveng was “delighted” that Trident’s management would now become part of the ownership.
The business has been bought by a new consortium known as Trident Steel Africa, which was specifically formed for the acquisition.
It comprises local and US private capital, including US-based private equity firm Ambassador Enterprises, Joseph Investments, Arbor Capital Investments and Trident Steel management.
Trident, which focuses on supplying steel products to the automotive, rail and mining industries, had a net asset value of R409m as of June 30, recording an operating profit of R220m and earnings after tax of R81m in the year leading up to that date.
Flanagan said the finalisation of the deal was crucial as it provided certainty to the original equipment manufacturing (OEMs) including Ford, Toyota, Isuzu and VW, and clarity to the staff, who have had insecurity about the future owners of the business.
The CEO said the R1.9bn JSE-listed company would settle all of its remaining bank debt while the group will retain all cash that was in the business on June 30.
“The settlement of our legacy debt will enhance our liquidity and improve balance sheet strength,” he said. “Settling the SA legacy debt brings to a close a difficult chapter in Aveng’s history and we look forward to turning our attention to our growth agenda.”
External legacy debt reduced from R879m to R481m in the 2022 financial year, with the group slashing it even further by R75m in the three months to September to R406m.
Aveng said it would now focus on its two cash-generative core businesses, McConnell Dowell, a major engineering, construction and maintenance contractor operating in the building, infrastructure and resources sectors in Australia, New Zealand, the Pacific Islands, Southeast Asia and the Middle East.
The second is Moolmans, a local-based leader in open-cut contract mining across Africa.
“Aveng is now in really good shape,” said Flanagan. “We will have a really strong balance sheet once this debt is settled.”
Major shareholders of the Johannesburg-based firm include Highbridge Capital Management, Whitebox Advisors, Steyn Capital, Absa, Standard Bank, Investec, FirstRand Retirement Fund and Rand Merchant Bank.
Aveng’s share price rose 2.94% to R15.75 on Tuesday, having dropped a little over 40% since the start of the year.
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