enX given the nod to buy Eqstra units

Johannesburg - The Competition Commission has recommended the Competition Tribunal conditionally approve the proposed acquisition by listed industrial group enX of the industrial equipment and fleet management divisions of listed leasing and capital equipment company Eqstra.

The transaction will also result in the recapitalisation of Eqstra’s contract mining division for about R7.8 billion.

If the transaction is finalised, the contract mining division will be Eqstra’s only remaining business.

All the resolutions related to the proposed transaction were passed by Eqstra shareholders at a general meeting yesterday and received at least 89 percent support from the votes cast.

The commission said yesterday that the proposed transaction was unlikely to substantially prevent or lessen competition in any market in South Africa, but job losses were likely to arise.

Itumeleng Lesofe, a spokesman for the commission, said although the merging parties had informed the commission that potential retrenchments would be limited to skilled employees, the commission was concerned that retrenchments might extend to unskilled employees who were unlikely to find alternative employment promptly.

“To address this concern, the commission recommends the imposition of conditions that limit retrenchments to a certain number of skilled employees.”

Eqstra said the Competition Tribunal hearing to consider the proposed transaction was scheduled to take place on Wednesday and was an important condition precedent for the finalisation of the proposed transaction.

The group said its annual financial results would be finalised following the outcome of the hearing and would be released next Friday.

In terms of the proposed transaction, enX would issue 52.7 million at R21 a share to Eqstra to buy the industrial equipment and fleet management units and raise R1.5bn, R1.4bn to be used to recapitalise Eqstra’s contract mining business, known as MCC. MCC will have a new capital structure and become a stand-alone listed company, with the R1.4bn capital injection used to repay current bank debt. Eqstra shareholders will receive 0.13 enX shares for every Eqstra share and a retained share in MCC.

Paul Mansour, enX’s chief executive, will on completion of the transaction become the executive deputy chairman of enX, with Eqstra’s chief executive, Jannie Serfontein, becoming enX’s chief executive.

Mansour said in July that their vision was to build the next industrial powerhouse and this transaction represented an opportunity to take a significant step towards achieving this goal.

“This capital structure will enable business units within the reorganised group to benefit more fully from the strong positions they hold in their respective markets.”

Mansour said they were confident the deal addressed the interests of shareholders and provided a well-grounded opportunity to participate in a new-look company with strengthened prospects.