The buyout of South Africa-based cement producer Holcim South Africa will be backed by roughly EUR1bn worth of high-yield bonds, people familiar with the situation told Dow Jones Newswires.
Black-empowerment consortium AfriSam Consortium (Pty) acquired a majority stake in Holcim this year.
Holcim Switzerland announced in August 2006 that it was selling 85% of its 54% stake in the local cement producer to AfriSam based on an enterprise value of ZAR16.4 billion. Earlier this year, construction, steel and cement group Aveng also announced that it was selling its 45.7% holding in Holcim South Africa to AfriSam for ZAR7.4 billion, according to press reports.
Citi and JPMorgan are arranging the debt. The bonds are expected to come to market toward the end of the first quarter of 2008, depending on market conditions, one of the people said.
Recent buyouts in South Africa, such as Brait Private Equity’s acquisition of South Africa’s biggest glass packaging company Consol Ltd., have been financed predominately in the high-yield bond market in the form of senior secured notes. The bond format allows the borrowers more flexibility to invest in growth, unhampered by the restrictive covenants of bank debt, and South Africa’s domestic institutional investor market isn’t big enough to absorb large debt packages exclusively in South African rand. South African issuers can achieve more flexible terms and higher leverage relative to the local markets from offshore investors.
As a result of the buyout, a new company, AfriSam (South Africa) (Pty), has been formed, Holcim South Africa said on its website. Holcim has maintained a 15% stake in the new AfriSam (South Africa) (Pty).
Holcim South Africa has total assets in excess of ZAR3.7 billion, annual sales of more than ZAR4.9bn and more than 2,000 employees, according to the Web site.
AfriSam Consortium is owned by Bunker Hills, community and women’s groups and employees of AfriSam (South Africa) (Pty).