JOHANNESBURG - Listed distribution group Barloworld has disposed of its Iberia equipment business, with overall proceeds of the transaction estimated to be 160 million (R2.4 billion).
Barloworld said yesterday that the price represented a small premium to the net asset value of the business at end-September last year, adding the proceeds would remain offshore to be used to fund future growth initiatives that were under consideration.
The group said negotiations with an interested party had successfully concluded and its board had approved the entering into a sale and purchase agreement with Tesa, a privately owned Italian group, subject to certain conditions.
Tesa, through its subsidiary CGT, became the Caterpillar dealer for the north of Italy in 1934 and in 2010 acquired the service territory for the south of Italy to become the sole dealer for Italy.
In 1990, it also acquired the service territory of the Balkans, which it operated under the name of Teknoxgroup.
Barloworld said the sale price would be determined at the closing date using the shareholders’ equity attributable to Barloworld after negotiated asset impairments and an agreed premium, but the overall proceeds of the transaction were estimated to be 160m.
It said Tesa would, on the closing of the transaction, settle a maximum of 142m cash, which would subsequently be adjusted. Barloworld added that 10m of the purchase price was deferred and payable in equal installments over a five-year period.
The group said Caterpillar had given the necessary consent for the transaction, which still remained subject to the approval of the Spanish and Portuguese competition authorities and consent and release by Barloworld’s lenders.
It said the transaction was expected to close by no later than July 2 this year after all the conditions had been met.
Barloworld has represented Caterpillar in Spain and Portugal for the past 26 years, with the business employing about 1075 full-time employees. The number of employees in the business has dwindled in recent years as Barloworld embarked on several restructuring programmes.
The disposal of the business follows a strategic review conduction by Barloworld last year.
This resulted in the group considering various option to address the under-performance of its Iberia Caterpillar operations and the decision by its board in September to dispose of the business.
Dominic Sewela, the chief executive of Barloworld, said in May last year that the major under-performing businesses that needed to be fixed were the group's equipment business in Iberia and logistics.
Sewela said Spain in 2016 generated negative returns and it had made a profit in only three of the past 10 years.
He stressed the group’s businesses needed to get closer to a return of 15percent to 16percent, which was the group's cost of capital.
The group confirmed in September last year that it was having preliminary discussions with “an interested party” about its troubled Iberia equipment business and gave notice of its possible exit from logistics if its business failed to improve its return on invested capital.
Barloworld added at the time that the group was also continuing to assess the possibility of expanding its Caterpillar dealership footprint in emerging markets, where its mining competencies and capital could be better deployed.
Shares in Barloworld dipped 6.14% on the JSE yesterday to close at R162.07.
- BUSINESS REPORT ONLINE