Cannistraro takes stake in Alert
ALERT Steel’s prospects were boosted yesterday when it said that American company Cannistraro had bought a majority stake in it and would make an offer to buy out the rest.
STRUGGLING steel product retailer Alert Steel’s prospects were boosted yesterday when it said that American company Cannistraro had bought a majority stake in it and would make an offer to buy out the rest.
Alert Steel has tried to restructure operations in the face of difficult market conditions, including poor demand for steel worldwide. The company has said it expects demand for its products to be subdued this year.
Last year, Alert Steel was hit by labour strikes at the company and within the transport and mining sectors.
A broad-based black economic empowerment (BBBEE) deal also collapsed last year. This was after Nedbank gained the shares the BBBEE partner would have bought, and then sold them.
Former Metcash CEO Peter Dodson replaced Johan du Toit as CEO in February.
The share price has collapsed 71% over the past year, from R373.58 on April 11 last year to R110 yesterday. For the 12 months to June last year, Alert Steel made a loss of R73m.
For the year to June 2011, it made a loss of R135.5m.
But Cannistraro has stepped in to save Alert Steel. Cannistraro was founded by John Cannistraro in Boston, US, in 1963.
Mr Cannistraro ran it as a plumbing shop and it later developed into a provider of heating, ventilation and air conditioning, fire protection and facilities maintenance services for large mechanical plants at hospitals, universities, laboratories and other facilities.
Cannistraro has a workforce of more than 300 people and earns annual revenues of more than $120m.
Cannistraro’s buyout of Alert Steel involves various transactions. The company acquired a medium-term loan of R70m against Alert Steel, which, as a result of the interest accrued thereon, has an outstanding balance of about R75m.
Cannistraro then purchased 35,021,939 shares in Alert Steel. The sale is subject to Competition Commission approval and, upon its implementation, Cannistraro will hold 62.28% of the shares in Alert Steel.
Cannistraro then looked to buy the rest of Alert Steel, that is 37.72% of the company.
Alert Steel has 51,999,636 shares in issue.
Of the remaining 16,977,697 shares in issue, owners of 10,113,241 shares waived their rights to receive a mandatory offer. But SA’s independent financial regulations body, the Takeover Regulation Panel, ruled that Cannistraro could still buy the 37.72%.
A cash confirmation for the 6,864,456 shares in respect of which offer rights had not been waived would be required.
Cannistraro would initially assist Alert Steel with its cash flow problems.
Mr Dodson was travelling yesterday and was unable to comment on the takeover.