Three major subsidiary companies in Protech Khuthele, the troubled listed civil engineering group that voluntarily applied in May to be placed in business rescue, are to be liquidated.
The group, according to its 2013 financial report, employs more than 1 000 people in its operations in South Africa and on the African continent.
The decision to liquidate the three subsidiary firms follows business rescue practitioner Gavin Gainsford concluding that there were no reasonable prospects of rescuing Protech, Protech Khuthele and Protech Readymix.
Protech said that Gainsford would be applying to court for the business rescue proceedings of these companies to be discontinued and for these companies to be placed under liquidation.
The group advised shareholders on June 6 that business rescue applications had been filed with the Companies and Intellectual Property Commission on June 3 for all seven of its subsidiary firms: Protech Khuthele Properties, Impact Compaction, Protech Khuthele Property Investments, Protech Readymix, Pela Plant, South African Road Testing Services and Protech Khuthele.
Protech said yesterday that the company was illiquid and unable to service its debts as they became due and payable.
“The company cannot continue operating and incurring debts without a guaranteed source of funding for the company going forward. With this in mind, the business rescue practitioner had very little choice but to discontinue the business rescue proceedings,” the company said.
The planned liquidation of three major group subsidiaries represents a spectacular failure since listed leasing and capital equipment company Eqstra made a hostile bid in December 2010 for the 67.2 percent of Protech it did not already own with the support of Protech’s black economic empowerment trust.
The offer lapsed in July last year. Eqstra’s offer of 60c a share for the Protech shares it did not own valued the proposed deal at about R146 million but an independent expert opinion by accounting firm PwC found the terms and conditions of the Eqstra offer were unfair and unreasonable to Protech shareholders.
Protech’s independent board subsequently recommended its shareholders reject the offer because it undervalued the company and was neither fair nor reasonable.
The shares were voluntarily suspended at 17c on June 12.
Protech reported on May 30 that it had applied to be placed in business rescue after receiving a demand from suppliers for the immediate repayment of project expenses incurred, which it was unable to pay.
The company also said on May 30 that it had become aware on the day that the anticipated receipt of R40m from a substantial debtor might be delayed or possibly not paid in full, which would adversely affect the company’s cash flow.
“As Protech cannot meet its commitments, Protech has no choice but to lodge an application for business rescue.”.
Two days earlier, chief executive Antony Page and three independent non-executive directors on the board – Malcolm Adamson, Matsotso Vuso and Terrence Rensen – had resigned with immediate effect.
Victor Dingle, the company’s newly appointed chief financial officer, was appointed acting chief executive with immediate effect.
In a trading update published in March, Protech highlighted problems with a mining infrastructure project in the Democratic Republic of the Congo (DRC), where the company was a 33 percent joint venture partner with Group Five Construction and Societe Africaine de Construction Au Congo.
“The difficulties include payment disputes and cost overruns,” it said at the time.
Protech added that group liquidity would remain tight until all payments due on the DRC project were paid during the next six months and the effects of the new secured work generated positive cash flows.