Roy Cokayne

In a deal valued at R1.6 billion, a consortium comprising black-controlled and -managed investment company Brimstone and other black economic empowerment (BEE) partners is to acquire a shareholding of between 8 percent and 8.5 percent in listed integrated logistics service supplier Grindrod.

The proposed transaction signals Brimstone’s entry into the infrastructure sector.

The company announced yesterday that it and BEE partners Calulo Investments and Solethu Investments had entered into a binding agreement with Grindrod to conclude the equity investment.

Brimstone said Grindrod was facilitating the investment, which would help to partially fund that firm’s capital projects and enable it to grow and diversify its earnings base.

The transaction would be facilitated by an equity capital raising by Grindrod through an accelerated bookbuild offering and specific issue of shares to the BEE consortium’s special purpose vehicle (SPV).

Subject to the approval of its ordinary shareholders, Grindrod’s board has approved an equity capital raising through the issue of up to R4bn worth of ordinary shares. Up to R3bn of the net cash proceeds will be utilised by Grindrod to fund capital projects and facilitate additional transactions.

Grindrod intends to implement the consortium placement following the bookbuild placement by issuing R1.6bn worth of its shares for cash to the BEE consortium’s SPV at the bookbuild price.

Brimstone will fund the cash consideration of between R450 million and R495m payable for its interest of between 59.2 percent and 65.1 percent in the BEE consortium’s SPV from its long-term funding facilities.

The conclusion of the BEE transaction is still subject to the fulfilment of a number of conditions precedent on or before June 30.

Mustaq Brey, Brimstone’s chief executive, said this transaction would allow Brimstone to establish infrastructure as a new area of focus alongside its investments in health care, food and financial services and was in line with its strategy of investing in quality assets that created long-term value for its shareholders.

Fred Robertson, the executive chairman, said Brimstone’s partnership approach had made it a BEE partner of choice and it looked forward to expanding this model to Grindrod.