Barloworld: Rise of a giant
By Mark Allix
Barloworld is a much slimmer conglomerate than it was near the end of apartheid, having given birth to companies including Illovo Sugar, Nampak, PPC, Tiger Brands and Reunert. It is celebrating 75 years on the JSE; it listed in 1941 at seven shillings and sixpence per share. It is one of nine companies to have been listed in SA this long.
The former Barlow Rand, so named after buying Rand Mines in 1971, began unbundling in 1993, becoming a more streamlined Barlow Ltd in the new SA. The group became Barloworld in 2000, later spinning off some household names.
Barloworld once owned the iconic Plascon paint brand, before Japanese raiders arrived and carried away Freeworld Coatings in a hostile takeover. Freeworld was spun off from Barloworld’s coatings division in 2007. The transaction was recognised as deal of the year on Wall Street in 2011, in deals valued from US$100m-$500m.
Many of Barloworld’s spin-offs remain listed on the JSE, but some, like Illovo Sugar, have become the engines of African growth for international groups such as Associated British Foods.
Others, such as cement maker PPC, may follow in future. Not long ago, Germany’s HeidelbergCement, which operates widely in Africa, was said to be eyeing it. At about the same time, black-owned domestic cement producer Afrisam went so far as to make a marriage offer in the hope of creating an African infrastructure giant that could take on the world. This was spurned.
Barloworld remains central to SA’s economy and of the Southern African region. Its core business is providing heavy mining and construction equipment, as it has nearly always done. But it is also heavily involved in diesel- and gas-driven power generators, the handling of industrial goods and logistics, as well as in automotive markets. By 1989 it employed 240,000 people, but it shed weight dramatically over the next 27 years. It now has 20,000 employees across 24 countries. Most are South Africans.
The company’s business model is to “seed, grow and harvest”, says CEO Clive Thomson. At the helm since 2007, he has overseen significant acquisitions and disposals. He says the next phase of growth will be expansion into “markets adjacent to current areas of operation”. These include Spain and Portugal, the Russian Far East and Siberia, and the core African equipment market.
In the 1960s, Barlows, as it was fondly called, rapidly expanded into motor retail, steel and building materials, handling equipment and consumer electronics. In 1970, it bought Rand Mines Ltd and became Barlow Rand, adding mining and property interests. The company began to produce cement, lime, stainless steel, televisions and paint. With interests from food to mining, it became a dominant player in many sectors of the SA economy.
Barloworld was formed by Major Ernest (Billy) Barlow as Thomas Barlow & Sons in 1902, using a borrowed £1,000. It evolved from selling woollen blankets from two small rented rooms in Durban to become a diversified industrial behemoth that once ranked 79th on the Fortune 500 list of global companies.
In the 1920s the major’s son, nicknamed “Punch”, took over the family business. In 1927, after winning a bet with a sugarcane farmer that machines could out-plough a span of oxen, he and a colleague went to the US and negotiated the Caterpillar dealership franchise for SA.
The group’s history is set in the context of SA’s turbulent past, conflict in the wider African region — including Angola — and in the full glare of the world stage. Thomson says in the dying years of apartheid the company was a pariah internationally, and it suffered under exchange controls.
With the latest mineral commodities crunch and volatile global markets, the group is again facing resistance. But Thomson says in its interim results to March the company put in a “resilient performance in a difficult trading environment, considering how much mining capex has come off in Southern Africa”.
Barloworld has sold about 36,000 heavy vehicles into the region over the decades. Where sales have faltered, after-market annuity income has provided the group with strong cash flow, while diversity into Europe and Russia has hedged earnings.