On 15 November 2024, Barloworld renewed its cautionary announcement, where it advised shareholders that it had entered into negotiations with a consortium of investors comprising Entsha Proprietary Ltd and Gulf Falcon Holding Ltd, a wholly-owned subsidiary of Zahid Group, regarding a proposed transaction which could result in the consortium, acting through a newly established company ‘Newco’ making an offer to acquire all of the issued ordinary shares in Barloworld, the largest Caterpillar dealer in Africa, one of the largest globally and possessing the second largest Caterpillar equipment remanufacturing plant in the world. Newco is 51% held by Entsha and 49% by Zahid Group.
In a joint announcement on December 11, Barloworld and ‘Newco’ announced ‘Newco’s’ firm intention to acquire the entire issued share capital in Barloworld through a scheme of arrangement for a cash scheme consideration of ZAR120.00 per share, values the entire issued share capital of the company at ZAR23.3 billion which currently equates to about US$1.3 billion.
Entsha’s 51% ownership of ‘Newco’ will allow ‘Newco’ to “continue to drive Barloworld’s future growth and support management’s strategic objectives for the business.” Entsha is wholly-owned by DKMS Group Pty Ltd (Manco), also a newly incorporated South African company. Manco, in turn, is wholly-owned by The Katlego Le Masego Trust, an inter vivos trust established for the benefit of Barloworld CEO Dominic Sewela and his family.
Zahid Group is an existing long-term financial investor in Barloworld, with an approx 18.9% shareholding in the company, and will “leverage its extensive sector expertise to bring value to Barloworld and support executive management who will continue to manage and operate the business as usual.”
Zahid Group is a leading family-owned Saudi Arabian business. Founded in the 1940s by the late Sheikh Yousuf Mahmoud Zahid, Zahid Group began its journey representing American car manufacturers and has been a primary Caterpillar dealer since 1950. As a long-term authorised Cat dealer in the Kingdom of Saudi Arabia, boasting a 75-year track record, Zahid Group says it brings extensive sector experience which it will leverage to support management to grow the business.
Sydney Mhlarhi, spokesperson for ‘Newco’ said: “Newco’s offer is a demonstration of Newco’s confidence in the long-term investment thesis of Barloworld, including its people, management, brand, and the markets in which it operates, as well as our commitment to South Africa as an attractive international investment destination. The transaction is an overwhelmingly positive vote of confidence in South Africa and will see Barloworld become a majority black owned, privately held, South African industrial company, maintaining the continuity of both Barloworld’s management, staff and operations in line with the Group’s existing diversified strategy to drive growth and value creation in the future. The shareholders of Newco take a long-term a view on its investments and are not motivated by short-term price movements but are attracted by the fundamental value and long-term sustainable, profitable growth we believe we can bring to Barloworld. As a result, Newco has proposed a compelling offer which it believes is fair and reasonable and worthy of consideration by shareholders as it provides them with the opportunity to accelerate the realisation of value for their shares and provides certainty of a premium to the company’s share price, in cash, for a cyclical business in what is an uncertain market.”
In addition, the statement said that Caterpillar supports the Proposed Transaction. The Proposed Transaction remains subject to Barloworld shareholder approval at a general meeting, the date of which will be confirmed in a circular to shareholders, as well as regulatory approval from the relevant competition authorities. Should the Proposed Transaction be successful, Barloworld will be delisted from the JSE and A2X.
The statement said that ‘Newco’ recognises the goodwill associated with Barloworld’s name, its 122-year history in the South African market and the strength of its brand within the markets where it operates. “As such, the Proposed Transaction will not affect the continuity of the name and brand, and Barloworld will continue to be a South African headquartered business which will continue to operate business as usual with no changes to working conditions or any job losses foreseen as a result of the Proposed Transaction.”
Through Entsha’s majority ownership in ‘Newco’ as a 100% black-owned South African entity, the proposed transaction the statement said will enhance Barloworld’s direct black-ownership whilst maintaining all other aspects of Barloworld’s BEE status, in line with the South Africa government’s objectives to build and transform the South African economy.
‘Newco’ will retain the ZAR2.9 billion Khula Sizwe broad based vehicle and maintain its commercial arrangements with Barloworld, ensuring the 29,000 Khula Sizwe majority black beneficiaries (comprising current and former Barloworld employees as well as public shareholders) continue to benefit post the Proposed Transaction.
In addition, the Barloworld Foundation, which complies with the Broad-Based Ownership Scheme requirements of the BEE Act, with a minimum of 60% of its economics flowing to black women, owns 3.5% of Barloworld valued at ZAR800 million at the offer price and will continue as shareholder of Barloworld post the Proposed Transaction. The Foundation will continue with their stated Economic Development and Corporate Social Investment initiatives on behalf of Barloworld.
Furthermore, ‘Newco’ has committed to implementing a management ownership transaction following the implementation of the Proposed Transaction, further broadening participation in Barloworld.
