Roy Cokayne
Basil Read has reached agreement to sell its wholly-owned mining consultancy business TWP to Australian Stock Exchange-listed WorleyParsons for R900 million.
The transaction is still subject to a number of conditions, including the approval of the listed construction and engineering company’s shareholders, but will result in Basil Read no longer having any presence in Australia or Peru.
Chief executive Marius Heyns said they believed the transaction created value for the company’s shareholders and fitted perfectly into its evolving strategy of increased focus on its engineering, procurement and construction (EPC) business and expanding into new growth areas.
He said the transaction would enable the group to concentrate on its core business, with increased emphasis on its special projects, such as the R3.2 billion contract to build an airport on St Helena island.
He said the proceeds of the R900m would be used towards reducing group debt, focusing on organic growth, and capital management initiatives to ensure the group had sufficient cash reserves to start investing in resources for the planned infrastructure rollout it believed would build momentum.
Heyns said Basil Read never went out looking to sell it, but had received an offer for TWP from WorleyParsons.
The acquisition excludes Basil Read Matomo Projects, TWP Investments and LYT Architecture, formerly known as TPS.P Architects.
Heyns said Basil Read had acquired TWP about three years ago for R662m and, including all the transactional and legal costs, would be making a profit by selling it for R900m.
“There is some profitability left in the divisions staying behind. Basil Read Matomo was established during the three-year relationship with TWP, leading to the EPC business that now has a pipeline of projects in excess of R1bn,” he said.
Heyns said 217 professionals would remain with Basil Read Matomo, while a further 27 seconded from TWP working on design would return to TWP when this work was completed.
Agreement was reached with WorleyParsons that Matomo would tap into TWP’s design skills if it had insufficient capacity in future.
Heyns said the disposal of TWP would “not really” affect Basil Read’s order book, which would be in excess of R10bn.
He said the group had a further R5bn in projects, of which R2bn was related to open pit mining that was not yet in its order book.
These were for projects where it had been awarded the contract but it had not yet been signed, it had submitted the lowest tender, it had negotiated directly with clients and where it had received letters of intent that could “start kicking in” in the next few months.
Sibonginkosi Nyanga, an analyst at Imara SP Reid, said the sale of TWP was surprising and raised questions about Basil Read’s strategy, particularly considering it had only been acquired three years ago.
Nyanga said Basil Read had about R1.1bn of debt on its balance sheet at the end of its last financial year, which had been a drag on the group’s results and it made sense to use some of the proceeds from the sale to pay off some of this debt.
Basil Read shares closed 17.65 percent higher at R10.