The Competition Tribunal has heard arguments from the Competition Commission and industrial stalwart Barloworld on why its management-led buyout will not harm SA’s cartel rules.
The takeover, which was approved by the commission, is likely to lead to a two-year moratorium on retrenchments after the transaction’s finalisation, which is led by a management-led consortium and a Saudi Arabian investor group.
The tribunal on Tuesday night heard arguments from Barloworld, the commission and labour on the mooted transaction — with none of the parties opposing the deal.
The multibillion-rand deal, spearheaded by Barloworld CEO Dominic Sewela, is expected to be closed this year if all goes according to plan. However, some obstacles stand in the deal’s way.
The proposed transaction, valued at about R23bn, involves a management-led consortium under 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, the commission told the tribunal.
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. However, unions insisted on Tuesday that Barloworld commits itself to a moratorium on retrenchments with the Food and Allied Workers Union, asking for a five-year moratorium, a request that was turned down.
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.
Standby offer
The takeover bid by a consortium led by Sewela, failed to garner enough shareholder support — triggering a standby offer which sets the stage for a protracted takeover.
London-based Silchester International Investors, which holds about 18% of Barloworld, was one of the investors who voted against the deal, joined by the Public Investment Corporation (PIC), which later changed its stance.
The standby offer is open to Barloworld shareholders. The PIC in April said it would support the standby offer after the consortium committed to implementing a 13.5% broad-based BEE transaction in Barloworld if the company is taken private. The BEE undertaking directly responded to the PIC’s earlier critique that the deal lacked inclusivity.
Standard Bank, SA’s largest bank by assets, has guaranteed a maximum of R17bn of the purchase price put forward by a consortium.
Rothschild & Co, an independent expert, arrived at a valuation range of R105.53-R119.42 a share for the deal.
The deal has garnered support from top stakeholders, including Caterpillar, Barloworld’s primary supplier and a revenue driver, which has publicly endorsed the standby offer and the prospect of local ownership.
The standby offer is open until September 11 and can be extended if needed.
With Lindiwe Tsobo
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