Barloworld’s share price rose the most in a quarter of a century in intraday trade on Wednesday after the industrial group said a consortium, including its CEO, had offered to buy and delist the company, which went public in 1940.
The shares rose as much as 21% to R111.30 — the biggest one-day gain since at least 1999 — after the announcement of the offer, which values the company at R23bn.
Barloworld confirmed that the group of investors had offered to buy all its issued and to be issued shares for cash via Newco, a special purpose vehicle.
Newco is owned by Entsha, a newly incorporated SA company that is ultimately owned by the Katlego Le Masego Trust on behalf of Barloworld CEO Dominic Sewela and his family; and Gulf Falcon Holding, a subsidiary of the Saudi Arabia-based diversified conglomerate Zahid.
Entsha has 51% of the voting rights in Newco, while Zahid owns about 18.9% of Barloworld. Newco is offering R120 per Barloworld share, in addition to the R3.10 dividend Barloworld announced on November 22.
“This represents a total value unlock at R123.10 per share which constitutes a premium of 87% to Barloworld’s 30-day VWAP [volume-weighted average price], which was R65.72 on April 12”, the day before a cautionary statement was issued, Barloworld said in a statement.
However, the proposed deal seems to have ruffled some feathers as a group of Barloworld shareholders — owning a collective 17.8% stake — have expressed opposition to it, saying that it would be “compelling” if the offer was at least R130 per share.
Through their London-based representative, Silchester International Investors, the shareholders on Wednesday said the consortium had “cross-walled” them in October talks after they repeatedly advised them Silchester was unwilling to tender its Barloworld shares unless offered at least R130 apiece.
No further negotiations to find a solution had occurred since mid-November, they said. The shareholders drew a line in the sand, promising to use every power granted to them in SA to safeguard their interests.
“A full privatisation of Barloworld is unlikely to succeed without the support of Barloworld’s primary shareholders, including Silchester,” the shareholders said. “Silchester believes that Barloworld with new management and a reasonable board of directors and proper capital allocation, is well placed to succeed in the coming years.”
The involvement of Entsha will allow it to support management’s strategic goals for the company, boost direct black ownership, and uphold all other aspects of Barloworld’s BEE status, it added.
“Caterpillar has expressed its support for the implementation of the proposed transaction,” Barloworld said.
To dispel any concerns that might be created by the CEO’s involvement in the consortium and the proposed deal, the board of directors previously emphasised that its newly established independent board would uphold transparency and increased governance mechanisms linked to the agreement.
Barloworld’s independent board said it had appointed Rothschild & Co as the independent expert to provide a report addressing takeover and Companies Act issues among other matters.
The experts submitted a draft report on a preliminary basis that the terms and conditions of the proposed transaction were fair and reasonable to shareholders. Consequently, the independent board plans to suggest that shareholders vote in favour of the sale.
The scheme is subject to various conditions including the approval of shareholders, the Takeover Regulation Panel and competition authorities.
Newco has provided the takeover regulation panel with a written, unconditional, irrevocable cash guarantee from Standard Bank for R17.1bn, which was necessary to guarantee the deal, Barloworld said.
“The offer demonstrates its confidence in the long-term investment thesis of Barloworld and the geographies it operates in,” Barloworld said.
“Given the consortium’s unique makeup, the combination of executive management expertise through Entsha, underpinned by a patient capital approach, provides a strong platform that will support the company’s existing management, staff and operations to continue to pursue the group’s existing long-term diversified strategy to drive growth and create value.
“The consortium recognises the goodwill associated with Barloworld’s name, its rich history and the strength of its brand within the markets in which it operates. The proposed transaction will not affect the continuity of the name, or the brand, and the company’s headquarters will remain in Johannesburg.”
Barloworld and Newco are expected to issue a joint circular within 20 days outlining the precise terms and circumstances of the transaction and a notice to call an AGM to review and, if necessary, ratify the sale.
By market close, Barloworld’s share price had given back some of its gains, ending up 15.49% at R107, giving it a market cap of R20bn.
Update: December 11 2024
This story has been updated with new information.
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