The Public Investment Corporation (PIC), Africa’s largest fund manager, has thrown down the gauntlet to the leadership of takeover target Barloworld, raising concerns about governance at the industrial stalwart.
With about R3-trillion in assets under management, the fund manager is often shy to publicly weigh in on events at its investee companies.
However, the asset manager, the JSE’s largest institutional investor, broke with tradition on Friday and said it was unhappy with events at Barloworld, which is facing a takeover bid by a consortium led by group CEO Dominic Sewela.
“The PIC is concerned with corporate governance standards at Barloworld and the steps its board followed in considering the transaction in question. These concerns have been expressed to the board in a series of robust engagements,” it said.
“The PIC expects boards of its investee companies to act in the best interests of the company and all its stakeholders.”
The PIC is Barloworld’s largest shareholder, with a 21.97% stake. Other large shareholders include Saudi Arabia’s Zahid Group, which is part of Sewela’s consortium.
Zahid holds about 18.9% of Barloworld but was excluded from voting on the deal at a special meeting last week. The consortium’s offer failed to garner enough shareholder support.
The mooted deal could only garner 36.63%, while 63.37% of shareholders voted against it — triggering a standby offer in terms of which the consortium will acquire all the Barloworld ordinary shares from ordinary shareholders “other than the Barloworld ordinary shares held by the excluded shareholders”.
The PIC joined UK-based Silchester International Investors in voting down the consortium’s offer.
Silchester, which owns about 18% of Barloworld, has insisted that the company’s board has failed to manage a conflict of interest regarding Sewela’s participation in the consortium.
Under new management and a new CEO, a “reasonable board” and good capital allocation, the company could deliver value for shareholders, it has said.
Sewela and his Middle East partners offered as much as R123 a share, valuing the company at just more than 4.3 times its historical earnings before interest, tax, depreciation and amortisation.
The offer ultimately values Barloworld at R23bn.
The PIC said it remained open to engage Barloworld on the transaction.
“The PIC believes the current offer for Barloworld still presents a premium to the company’s fair value, and at a minimum to the preprice offer. This is within the valuation range as recommended by the independent valuer, Rothschild,” the PIC said, adding that it preferred inclusive transactions.
The consortium said last month that its offer was final and its bid had received support from Caterpillar — a key supplier and main revenue driver for Barloworld — accounting for 83% of revenue for the 2024 financial year.
The consortium’s attitude is that Barloworld as an unlisted business “will provide a more efficient platform that will support the pursuit of the company’s existing long-term industrial growth strategy, which is expected to deliver significant value for all stakeholders”.
Standard Bank has guaranteed a maximum of R17bn of the purchase price proposed by the consortium.
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