Grindrod Bank sale to finance new venturesComment on this story
GRINDROD, the listed integrated logistics service supplier, is remaining coy about the proposed purchase price that Bidvest has offered to acquire Grindrod Bank, which is behind Net1 UEPS, a technology firm that won a multimillion-rand contract to distribute social grants on behalf of the SA Social Security Agency (Sassa).
Bidvest, the listed internationally diversified trading and services group, in July announced it had reached agreement to acquire 100 percent of Grindrod Bank for an undisclosed amount and hoped to conclude the transaction by the end of the year.
Alan Olivier, the chief executive of Grindrod, said yesterday he could not comment on the price Bidvest was paying for the bank.
He said the proceeds from the sale would be used to finance the various major expansion projects being undertaken by Grindrod.
He added that Bidvest was conducting a final due diligence on the bank, which should be completed fairly soon and the transaction would then have to be approved by the Competition Commission and Reserve Bank.
Olivier said Grindrod Bank had performed very well in the six months to June, with attributable profit increasing by almost 100 percent to R94.9 million from R47.8m in the previous corresponding period.
Assets under management grew by 6 percent to R13 billion from R12.3bn while total funding, excluding Sassa deposits, increased to R5.2bn from R4.9bn and bank advances rose by 11 percent to R4.1bn from R3.7bn.
Olivier said the bank was nicely positioned and all the businesses in the bank performed well in the reporting period, with improved earnings from the 9.8 million Sassa card business.
“Bidvest are lucky if they get it [the bank],” he said.
Olivier said Grindrod was selling the bank because it had always indicated it was prepared to let it go “when the right party came along to acquire the bank and were prepared to pay the right price”.
He said Grindrod was prepared to sell the bank because it was never part of the group’s core strategy of building a ports and terminals and rail infrastructure business and providing a total integrated transportation service for its customer base.
Grindrod reported a 29 percent decline in group headline earnings a share to 321c in the six months to June from 450c in the previous corresponding period yesterday.
Olivier said the major reason for this was the R1.6bn empowerment transaction concluded in the period that resulted in a black economic empowerment (BEE) consortium acquiring an 8.4 percent shareholding at group level.
The consortium comprises listed black-controlled and managed investment company Brimstone and other BEE partners.
Grindrod’s revenue in the reporting period increased by 16 percent to R13.39bn from R11.49bn. He attributed this increase partly to the weaker average exchange rate and an increase in dry cargo freight rates.
Trading profit fell by 8 percent to R866m from R943m.
Olivier said the primary reason for this was the once-off cancellation of charters in the shipping division in the first half of the previous year that resulted in a fairly significant rise in profit last year that was not repeated in this reporting period.
An interim ordinary dividend at 13.6c a share was declared, lower than the 20c a share declared in the previous corresponding period.
Olivier said Grindrod was well positioned to further capitalise on its opportunities using its extensive experience in the logistics value chain, respected brand and shareholder support but current depressed shipping rates would put pressure on earnings in the near term.
Grindrod’s shares fell 4.87 percent to close at R24.01; Bidvest shares dropped 1.02 percent to close at R290 on the JSE yesterday.