PRETORIA – Troubled construction and engineering group Aveng has agreed to sell its rail business to wholly black-owned Mathupha Capital for R133 million cash. Executive chairperson Eric Diack said yesterday that the sale was part of the group's announced strategy to offload non-core assets for value.
“We believe Mathupha Capital has the necessary expertise and market knowledge and is therefore ideally positioned to steward Aveng Rail into its next phase of sustainable growth and development,” he said.
The group said Aveng Rail employees would also be transferred to the new entity, with Mathupha Capital then acquiring 100 percent of the business. Proceeds from the sale would be used to strengthen the financial position of the group and contribute to the overall reduction of Aveng’s debt.
The transaction is subject to a number of conditions precedent, including the conclusion of the final and binding agreements and all statutory and regulatory approvals, but Aveng said it expected it to be finalised by year's end. Aveng Rail is a leading track work contractor in southern Africa and focuses on the development, construction, rehabilitation and maintenance of regional track work systems.
Mathupha Capital was a Level 1 broad-based black economic empowerment (BBBEE) investment company that invests in strategic companies that design, engineer and construct transport infrastructure and manufacture products supplied to the rail sector.
Aveng said Mathupha had been exploring opportunities in the rail sector to enable it to become a fully-fledged railway solution provider.
It said the proposed transaction would be an integral part of giving effect to Mathupha’s strategy. The disposal of non-core assets was one of the three pillars in Aveng’s strategic review to turnaround the group’s performance.
It identified Aveng’s Australian business McConnell Dowell and open-pit mining business Moolmans as core businesses, while Grinaker-LTA, manufacturing and steel were deemed non-core. The target date for the completion of all the non-core disposals was June next year.
In terms of the sale and purchase agreement entered into with Mathupha Capital, Aveng would establish a limited liability private company to which the agreed tangible and intangible assets of Aveng Rail, including the short- and long-term borrowings relating to the business, would be transferred as a going concern.
Apart from the disposal of non-core assets, Aveng also plans capital restructuring of the group and improving the operational performance of its core businesses.
The restructuring of Aveng’s balance sheet has largely been completed through a rights issue that has raised R493m, the early redemption of a R2 billion convertible bond that was to mature next year, and the restructuring of the group's bank debt.