Eqstra bought out in R7.8bn deal
Eqstra Holdings’ units are being bought out by enX in a R7.8 billion deal, which the parties say will create SA’s next industrial giant.
Through what is effectively a takeover, Eqstra is is selling its Industrial Equipment and Fleet Management divisions to enX Group, which will also recapitalise Eqstra’s Contract Mining division.
The deal, which is subject to the customary clearances, will see enX CEO Paul Mansour become executive deputy chairman of enX and Jannie Serfontein, Eqstra’s CEO, will become enX’s CEO. Key executives of each of the underlying businesses will continue in their current roles.
Mansour says the deal is an opportunity to take a “significant step” towards achieving its goal of building the next industrial power house. “We also have the prospect of building a dedicated and focused mining services business.”
He notes a new capital structure, which will be implemented to mitigate liquidity pressures, will enable business units within the reorganised group to benefit more fully from the strong positions they hold in their respective markets.
“We are also confident that this transaction addresses the interests of shareholders and provides a well-grounded opportunity to participate in a new-look company whose prospects are strengthened.”
Eqstra is a holding company that currently has three units: Eqstra Industrial Equipment (EIE), Fleet Management & Logistics (FM&L), and Contract Mining & Plant Rental (CM&PR), also known as MCC. In the year to June 2015, it turned over R9.5 million, down from the almost R10 million it turned over in the previous year. Net income, at R254 000, was mostly flat compared with 2014.
At the time, the company explained that it had loss-making contracts in its mining unit, and its assets had not been used to their potential. However, its operating profit improved.
enX, which has been buying out other companies, is an industrial group with clients in heavy industry, mining and construction groups, wholesalers, retailers, technology and telecommunications companies, banks and manufacturers. It turned over R882 million in the year to August, a 51 percent improvement on the previous year, although net income was mostly flat.
Serfontein says the deal will resolve the challenges Eqstra faces in the current economic cycle and ease cash flow pressures.
In a statement issued on Wednesday, the companies explain the deal will see enX issue 52.7 million enX shares at R21 a share (post consolidation) to Eqstra to acquire the Industrial Equipment and Fleet Management divisions and raise R1.5 billion of which R1.4 billion will be used to recapitalise the Contract Mining business.
After the deal is wrapped up, enX will be clustered as follows:
On completion of the transaction the enX businesses will be arranged and managed in three clusters:
- Industrial Equipment, which will comprise Eqstra’s Industrial Equipment division and enX’s existing power and wood businesses;
- Fleet Management, which will comprise Eqstra’s Fleet Management division; and
- Fuel and Chemicals, which will comprise enX’s oil lubricants business and the chemicals distribution business of the to-be acquired West Africa International Proprietary Limited.
The contract mining division currently known as MCC will have a new capital structure and remain a standalone public company. The R1.4-billion capital injection will be used to repay current bank debt.