Tawanda Karombo

Barloworld stocks plunged by more than 5% in afternoon trade on the JSE on Wednesday following a vote against the R23 billion takeover bid by a consortium involving management of the company and Saudi Arabian company, Zahid.

Barloworld CEO, Dominic Sewela, has been criticised for pushing for the takeover of the company by Zahid. The board of Barloworld approved the bid by the Zahid consortium a few weeks ago but shareholder disagreements have dogged the transaction, culminating in a no vote from shareholders on Wednesday.

Shareholders in Barloworld voted against the acquisition and also rejected a motion to pay fees for independent board members at an extraordinary general meeting held on Wednesday. Sewela is enlisted as a director of Newco, which was the acquiring company, with Zahid also having shares in the company.

Newco had offered to acquire all of the Barloworld ordinary shares by way of a scheme of arrangement. It had also been proposed that Barloworld would delist from the JSE after the buyout, with this bid failing on Wednesday after a majority of the shareholders in the industrial equipment group voted against the offer.

Shares in Barloworld slumped by around 5% to about R102.90 in afternoon trade on the JSE on Wednesday although market watchers said the share price remained supported above R100 reflecting positive sentiment.

This was despite Caterpillar having “expressed its support for the implementation of the Newco Offer,” according to Newco.

Analysts and shareholder representatives in Barloworl said the stage had now been set for further feuding between shareholders in Barloworld.

Shareholders that were opposed to the buyout and de-listing of Barloworld from the JSE included the UK investment firm, Silchester International. Silchester was now likely to pursue the dismissal of the Barloworld board as well as Sewela as CEO.

“(Silchester) are still seeking the board's and CEO's skalps on top of that,” said Urguhart Partners.

For the full year period ended September 2024, revenues in Barloworld declined by 7% to R42 billion while earnings before interest, tax, depreciation and amortisation (Ebitda) similarly fell by 7% to R5bn.

Sewela attributed the slump in revenue for the full year period to “subdued trading results from the Southern African equipment division and lower activity from Vostochnaya Technica (VT).

Performance for Barloworld Mongolia was, however exceptional at a revenue growth of 66%, which augmented the decrease in other territories.

“Ingrain's performance was in line with the prior year's performance. It was pleasing see our geographic diversification strategy at work, decreasing the impact of cyclicality,” said the company.

Nonetheless, operating profit from core trading activities for the year fell by 12.6% to R3.8bn. With gross debt in the company reducing by 29% to R7.9bn, Barloworld paid a total dividend for the year of 520 cents per share.

As a result of the resolutions tabled not being passed by the requisite majority of Barloworld shareholders the Standby Offer has been triggered.The timeline applicable to the Standby Offer, will be announced on SENS and A2X in the coming days.

The offerr is now open for acceptance by Barloworld shareholders at R120 per share in cash, maintaining the same value as proposed in the scheme of arrangement. The tota lvalue unlock of the offer continues to represent a significant premium of 87% to Barloworld’s 30-day VWAP as at April 12, 2024.

BUSINESS REPORT

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Shareholders vote against Barloworld buyout by CEO and Saudi consortium