Barloworld in talks on how to restructure its B-BBEE deal
BARLOWORLD is in discussions with its broad-based black economic empowerment (B-BBEE) and some of its major shareholders about the restructuring options for the R2.4 billion empowerment transaction it concluded in 2008.
The listed distribution group is exploring opportunities for growth within the broader automotive value chain and is close to separately reporting the results of its Caterpillar power business.
Clive Thomson, the chief executive, said yesterday it had maintained its B-BBEE level 2 rating in the year to September. The empowerment transaction it entered into with six strategic black partners and three community service groups in September 2008 would mature next year.
He confirmed it was looking at ways to restructure this deal but any proposals it put forward were likely to come before the group’s general meeting next year. He said the group needed to assess how its current deal closed out, where it left the group in terms of its B-BBEE rating and what, if anything, needed to be done relative to that deal or any future transaction. “We have to do something in that space. There are various options that are open to us.”
In terms of the empowerment transaction concluded in 2008, strategic black partners were allocated 5.88 percent of the shareholding in the group; employees, black management and black non-executive directors got 2.39 percent; an educational trust, 0.78 percent; and community service groups, 0.95 percent.
The external partners were Ayavuna Women’s Investments, Moty Capital Partners Consortium and Izingwe BAW Holdings.
Community-focused organisations that participated were the Disability Empowerment Concerns Trust Investment Holding Company, Ikamva Labantu Empowerment Trust and Shalamuka Foundation.
Thomson confirmed the group was in discussions related to a transaction in the broader automotive value chain. If these progressed to fruition, a deal could be concluded within the next few months. “It will be in aspects related to motor vehicles but not necessarily investing in new dealerships.”
He said there was a mediumterm intention to strip out the power business from the equipment business because of the focus the group was putting on this and its scale, with it now producing annual revenue of $350 million (R3.8 billion).
“It’s starting to get to a point where it’s of sufficient scale to warrant [separate] disclosure. But it’s probably still a year or so away before we are in a position to do that.”
Thomson said the scale of the opportunity for its power business had risen in the past 18 months to two years and was putting the infrastructure in place to capitalise on this.
Major opportunities were in big oil and gas opportunities in Angola and Mozambique and the potential shale gas opportunity in South Africa, plus a big potential market in Russia with its oil and gas reserves.
There were also opportunities for standby power in South Africa because of the shortfall in electricity capacity and for dedicated power in remote sites.
A strong performance by the automotive and logistics division and good performance by equipment Southern African enabled Barloworld to report solid financial results in the year to September.
Headline earnings a share from continuing operations grew by 10 percent to 857c from 780c. Revenue rose by 4 percent to R62.1bn from R59.5bn. Operating profit increased by 16 percent to R3.8bn and the operating margin improved to 6.2 percent. The total dividend a share increased by 10 percent to R3.20 from R2.91.
Shares rose 2.21 percent to close at R100.90 yesterday.