Regional Avis and Budget car rental and fleet operations to be listed on the JSE next month
BARLOWORLD, after trying to sell its car rental and fleet lease operations since 2019, said yesterday it would now unbundle subsidiary Zeda, the owner of Avis and Budget operations in the region, and separately list it.
Zeda trades in 10 other sub-Saharan African countries. It will be the second time the local Avis operations are listed – in April 1997 Servgro unbundled and Avis Southern Africa was listed on the JSE, but it was bought by Barloworld in 2005 and delisted.
Barloworld said the unbundling would be by way of listing 189 million Zeda ordinary shares, or 100% of Zeda’s share capital, on December 13. There would be a distribution in specie of listed Zeda distribution shares to Barloworld shareholders, on a one-Zeda share for one-Barloworld share held, basis.
The move comes as Barloworld is pivoting towards defensive, relatively asset-light and cash generative industrial sectors, based on a business-to-business operating model, and it has already divested of a number of businesses that did not fit into this model, such as its former vehicle retail operations.
“The unbundling is in line with this strategy,” the board said, adding the separation will enable Zeda to execute on its own strategy and to operate in a more focused and efficient manner, unshackled by Barloworld’s capital allocation framework.
A pre-listing statement that is expected to be published on November 28 should provide details of Zeda’s financial health, but it is well known that car rental companies took heavy losses in South Africa during the Covid19 pandemic period.
On the other hand, as an indication
of the potential of listed car rental companies, the much bigger Nasdaq-listed Avis Budget Group Inc’s financial results for the third quarter to October showed revenue at a new record, while its net income was also at a historical high.
Barloworld said: “Zeda will benefit from a dedicated executive management team accountable to a dedicated board of directors.”
A listing would provide it with autonomy to access and allocate capital,
improve management focus and flexibility, provide enhanced governance and accountability, and to optimise Zeda’s cost of capital and ability to drive a market leading return profile.
For Barloworld, which now has two primary operating divisions, Industrial Equipment & Services and Consumer Industries (food and ingredient solutions), the listing will complete its noncore divestiture programme.
It would further de-leverage Barloworld’s
balance sheet and allow it to allocate resources in keeping with its strategy.
The unbundling would give Barloworld shareholders an opportunity to participate in the long-term prospects of both Zeda and Barloworld.
Barloworld yesterday declared an ordinary dividend of 295 cents per share for its 2022 financial year (2021: 300c) and a special dividend of 550c per share (2021: 1 150c).