Rise of a gi­ant

Financial Mail - - FEATURES -

Bar­loworld is a much slim­mer con­glom­er­ate than it was near the end of apartheid, hav­ing given birth to com­pa­nies in­clud­ing Illovo Su­gar, Nam­pak, PPC, Tiger Brands and Re­unert. It is cel­e­brat­ing 75 years on the JSE; it listed in 1941 at seven shillings and six­pence per share. It is one of nine com­pa­nies to have been listed in SA this long.

The for­mer Bar­low Rand, so named af­ter buy­ing Rand Mines in 1971, be­gan un­bundling in 1993, be­com­ing a more stream­lined Bar­low Ltd in the new SA. The group be­came Bar­loworld in 2000, later spin­ning off some house­hold names.

Bar­loworld once owned the iconic Plas­con paint brand, be­fore Ja­panese raiders ar­rived and car­ried away Free­world Coat­ings in a hos­tile takeover. Free­world was spun off from Bar­loworld’s coat­ings di­vi­sion in 2007. The trans­ac­tion was recog­nised as deal of the year on Wall Street in 2011, in deals val­ued from US$100m-$500m.

Many of Bar­loworld’s spin-offs re­main listed on the JSE, but some, like Illovo Su­gar, have be­come the en­gines of African growth for in­ter­na­tional groups such as As­so­ci­ated Bri­tish Foods.

Oth­ers, such as ce­ment maker PPC, may fol­low in fu­ture. Not long ago, Ger­many’s Hei­del­bergCe­ment, which op­er­ates widely in Africa, was said to be eye­ing it. At about the same time, black-owned do­mes­tic ce­ment pro­ducer Afrisam went so far as to make a mar­riage of­fer in the hope of cre­at­ing an African in­fra­struc­ture gi­ant that could take on the world. This was spurned.

Bar­loworld re­mains cen­tral to SA’s econ­omy and of the South­ern African re­gion. Its core busi­ness is pro­vid­ing heavy min­ing and con­struc­tion equip­ment, as it has nearly al­ways done. But it is also heav­ily in­volved in diesel- and gas-driven power gen­er­a­tors, the han­dling of in­dus­trial goods and lo­gis­tics, as well as in au­to­mo­tive mar­kets. By 1989 it em­ployed 240,000 peo­ple, but it shed weight dra­mat­i­cally over the next 27 years. It now has 20,000 em­ploy­ees across 24 coun­tries. Most are South Africans.

The com­pany’s busi­ness model is to “seed, grow and har­vest”, says CEO Clive Thom­son. At the helm since 2007, he has over­seen sig­nif­i­cant ac­qui­si­tions and dis­pos­als. He says the next phase of growth will be ex­pan­sion into “mar­kets ad­ja­cent to cur­rent ar­eas of op­er­a­tion”. These in­clude Spain and Por­tu­gal, the Rus­sian Far East and Siberia, and the core African equip­ment mar­ket.

In the 1960s, Bar­lows, as it was fondly called, rapidly ex­panded into mo­tor re­tail, steel and build­ing ma­te­ri­als, han­dling equip­ment and con­sumer elec­tron­ics. In 1970, it bought Rand Mines Ltd and be­came Bar­low Rand, ad­ding min­ing and prop­erty in­ter­ests. The com­pany be­gan to pro­duce ce­ment, lime, stain­less steel, tele­vi­sions and paint. With in­ter­ests from food to min­ing, it be­came a dom­i­nant player in many sec­tors of the SA econ­omy.

Bar­loworld was formed by Ma­jor Ernest (Billy) Bar­low as Thomas Bar­low & Sons in 1902, us­ing a bor­rowed £1,000. It evolved from sell­ing woollen blan­kets from two small rented rooms in Dur­ban to be­come a di­ver­si­fied in­dus­trial be­he­moth that once ranked 79th on the Fortune 500 list of global com­pa­nies.

In the 1920s the ma­jor’s son, nick­named “Punch”, took over the fam­ily busi­ness. In 1927, af­ter win­ning a bet with a sug­ar­cane farmer that ma­chines could out-plough a span of oxen, he and a col­league went to the US and ne­go­ti­ated the Cater­pil­lar deal­er­ship fran­chise for SA.

The group’s his­tory is set in the con­text of SA’s tur­bu­lent past, con­flict in the wider African re­gion — in­clud­ing An­gola — and in the full glare of the world stage. Thom­son says in the dy­ing years of apartheid the com­pany was a pariah in­ter­na­tion­ally, and it suf­fered un­der ex­change con­trols.

With the lat­est min­eral com­modi­ties crunch and volatile global mar­kets, the group is again fac­ing re­sis­tance. But Thom­son says in its in­terim re­sults to March the com­pany put in a “re­silient per­for­mance in a dif­fi­cult trad­ing en­vi­ron­ment, con­sid­er­ing how much min­ing capex has come off in South­ern Africa”.

Bar­loworld has sold about 36,000 heavy ve­hi­cles into the re­gion over the decades. Where sales have fal­tered, af­ter-mar­ket an­nu­ity in­come has pro­vided the group with strong cash flow, while di­ver­sity into Europe and Rus­sia has hedged earn­ings.

Bar­lows bought Ford’s Nag­ing­ton mo­tor deal­er­ship on the East Rand in 1959, be­gin­ning a decade of di­verse ex­pan­sion. When Punch Bar­low died in 1979, Bar­low Rand ex­panded into the US, ad­ding in­for­ma­tion tech­nol­ogy, electrical engi­neer­ing and tex­tiles busi­nesses in the 1980s, and start­ing to man­age IBM and Merck brands in SA.

Mean­while, Bar­low Rand took se­condary list­ings on var­i­ous Euro­pean stock ex­changes, later delist­ing some of these over lan­guid trad­ing vol­umes. In 1984 it bought Bri­tish agri­cul­ture, ma­te­ri­als han­dling, science prod­ucts and pa­per con­vert­ing as­sets. By 1989, it reached prof­its of R1bn.

In 1992 it ex­panded in Europe, ac­quir­ing com­pa­nies in Bel­gium, Spain and Por­tu­gal. In 1994 it was granted Cater­pil­lar deal­er­ship fran­chises cov­er­ing South­ern Africa. It ac­quired Aus­tralian as­sets and started to

Clive Thom­son Proud of Rus­sian op­er­a­tions

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