Aveng, South Africa’s biggest construction and engineering company, will sell its entire 45.65 percent shareholding in cement producer Holcim South Africa for R7.4bn, paving the way for South Africa’s biggest black economic empowerment (BEE) transaction.
The decision took some analysts by surprise, particularly as Aveng chief executive Carl Grim has been outspoken on the proposed transaction, saying the company read about it in the press.
As recently as last week, Grim said Aveng did not have a list of all the shareholders in the BEE consortium and vowed that it would not allow an important asset such as Holcim SA to be stolen from its shareholders.
Aveng said the deal was subject to shareholder approval. Its board considered it inappropriate to comment further until the shareholders had received a detailed circular.
But Grim said the deal was a significant empowerment transaction in the cement sector and achieved fair value for Aveng shareholders. He declined to comment further.
Aveng’s decision comes after Holcim announced in August last year that it planned to sell 85 percent of its 54.34 percent stake in Holcim SA to a BEE consortium for R6.82 billion.
Aveng’s disposal of all its shares in Holcim SA through a buy-back transaction with Altur Investments, the holding company of Holcim SA, means the AfriSam Consortium will acquire 85 percent of the cement company. The Swiss parent will hold the remaining 15 percent.
Under the transaction proposed last year, AfriSam was to acquire a 76.5 per cent stake in a new entity that would own 54 per cent of Holcim SA. Holcim was to retain a 15 per cent share in this company, while Aveng was given the opportunity to obtain 8.5 percent.
The AfriSam Consortium is headed by Eltie Links, the former trade negotiator and South African ambassador to the EU.
Explaining the rationale for its decision, Aveng said it was its strategy to achieve operational control over or have a controlling interest in all its major investments. The board had considered alternatives for the Holcim SA investment and believed the disposal at an implied enterprise value of R16.4 billion “represents an attractive exit opportunity”. It also enhanced Aveng’s enterprise development credentials through its facilitation of a landmark BEE deal.
Aveng said R6.8 billion of the total R7.4 billion disposal value would be payable in cash. It would use a further R641 million in credits for the secondary tax on companies to offset future liabilities under this tax for payments to shareholders.
It expects that at least 50 percent of the cash proceeds will be returned to shareholders.
The disposal is subject to the successful conclusion of the funding arrangements of the BEE consortium by May 31.
Links said the financing of the deal was “very sensitive and confidential at this stage”. But the funding arrangements were on track and even though the headline funding requirement had increased substantially, the funding structure had been simplified with Aveng’s decision to exit.
The effective date of the disposal, subject to all the conditions being met, will be January 1.