A group of investors behind the deal to buy a controlling stake in SAA has regulatory approval to get it over the line, taking one of President Cyril Ramaphosa’s biggest privatisation drives a step closer to completion.
The Competition Tribunal, which adjudicates on antitrust matters brought to it by the Competition Commission, said the Takatso Consortium has the go-ahead to buy 51% of SAA on condition that it does not cut jobs and that minority shareholders sell their 20% stake in Takatso.
Shareholder Global Aviation, which co-owns Lift, is already a player in the sector, presenting a conflict of interest scenario in which they could share confidential information with SAA.
The deal, if it gets over the line, is another step forward for Ramaphosa’s structural reform agenda that has seen his government open floodgates of private investors in power generation. Last week, Transnet picked a multinational port operator to turn around one of the world’s most inefficient harbours.
Like most state-owned companies, SAA has been a drain on the fiscus. It has been cited as one of the primary sites of state capture, while companies from mining to industrials have been counting billions of rand in lost sales due to an inefficient rail transport system.
“The Competition Tribunal has affirmed our belief as government that a revitalised and a well-capitalised SAA presents the country with significant opportunities to boost economic connectivity and strategic reach that should benefit our economy and our people for years to come,” public enterprises minister Pravin Gordhan said in a statement.
The deal could still be torpedoed. While finance minister Enoch Godongwana allocated R1bn to SAA in his February budget speech, the amount is not enough to settle the legacy debt estimated to be R3.5bn.
Share sale
Meanwhile, the minority shareholders in Takatso have appointed advisers to identify potential buyers of their shares in the consortium led by Africa-focused private equity firm Harith General Partners to get the deal done.
The minorities hold an effective 10.2% stake in SAA via their 20% in Takatso, which will acquire a 51% stake in the SAA group when the deal closes.
Both entities have extensive experience in deal-making and aviation, according to Gidon Novick, who represents the minority shareholders in the consortium.
They include Global Aviation, operator of local airline LIFT. “We have proactively started the process of selling our shares, which I imagine will take some time. We do not want to hold up Takatso’s transaction with SAA and perpetuate any further state funding of the airline,” he said.
Novick said the local and international advisers appointed by the minority shareholders will help to identify potential investors, take them through the investment case and negotiate a deal down the line.
“The advisers are directly in contact with majority shareholders Harith. We have removed ourselves from the process as we are sensitive about confidentiality and information on SAA,” Novick said.
Asked about the value of the shares, he said he understands SAA has a significant property portfolio and also subsidiaries, including SAA Technical and Air Chefs. Its fourth subsidiary, Mango, is in business rescue and looking for a buyer as it is not part of the Takatso deal.
“The SAA business plan that we built for the consortium showed a very valuable regional airline group over time,” Novick said. Ideally the minorities would like to get multiple offers to get fair value for the shares.
“We’ve come to terms with the fact that we won’t be involved in SAA. LIFT’s premium offering and highly efficient cost base is proving to be a successful formula in the local market and has excellent growth potential — it’s keeping us very busy for now,” he concluded.
Update: July 25 2023
This story has been updated with new information throughout.
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