Merger to ease CIG liquidity struggles

Consolidated Infrastructure Group (CIG) is set for a cash injection after the Competition Tribunal approved its merger with Canadian-based investment firm Fairfax Africa Holdings (FAH).

In addition to improving liquidity, the move will boost CIG’s efforts to turn around struggling power infrastructure subsidiary Consolidated Power Projects Group (Conco).

CIG CEO Raoul Gamsu said the company had struggled in the SA market because of the dearth of investment by stateowned companies.

Conco provides power and extraction services, such as the supply of low-, medium- and high-voltage solutions, electrical substations, overhead power lines and renewable energy.

Gamsu said local trading conditions had been catastrophic. The company needed additional capital to entrench itself in the international market, he said.

Earlier in 2018 CIG said the transaction with FAH was part of steps to review and evaluate the company’s long-term funding requirements and capital structure. At the time, CIG said FAH, which has a market capitalisation of $660m, sought long-term capital appreciation by investing in public and private equity securities and debt instruments in Africa.

“They are good at capital allocation,” Gamsu said.

The Competition Commission, which assesses mergers before referring them to the tribunal for decisions, said it had considered the activities of CIG and FAH “and found that the proposed transaction does not result in a horizontal overlap because the acquiring group does not provide any products or services that are substitutable to the target firm’s products and services”.

The commission said the transaction was unlikely to substantially prevent or lessen competition in any market in SA. It also found that the proposed transaction does not raise any employment concerns, it said.