JSE-listed AECI has announced the signing of a share purchase agreement with a consortium involving Old Mutual Private Equity (OMPE) and Sphere Investments to sell its entire ownership stake in wholly-owned subsidiary Much Asphalt for an estimated R1.1-billion. The sale remains contingent on approval from the Competition Commission, as well as the finalisation of a restructuring agreement between AECI Mozambique and Much Asphalt Mozambique regarding operations in Mozambique.
The deal will be financed through a combination of debt and equity and is expected to close during the first quarter of next year.
Much Asphalt manufactures and supplies bituminous products that are widely used in infrastructure projects, such as road and runway construction, as well as for private applications. Its product offerings include hot and cold asphalt, bituminous road binders, emulsions, primers, precoats and modified binders.
AECI said the divestment was in line with its strategic focus on core businesses, specifically AECI Mining and AECI Chemicals. The company said on November 4 that the move reflected its intent to divest from operations that do not closely align with its primary business objectives.
This reallocation aligns with AECI’s strategy to streamline its portfolio and establish a foundation for future growth. AECI further stated that this shift is intended to improve operational efficiency and enhance performance by leveraging in-house expertise in areas where the company possesses strong market potential and competitive advantages.
For the year ending December 31, 2023, Much Asphalt recorded earnings after tax of R74-million.
“Together, OMPE and Sphere provide a platform for financial strength, market access and long-term success for Much Asphalt. This transaction is another significant step in our strategic journey, and we are pleased with the outcome,” AECI group CEO Holger Riemensperger said.
OMPE said such an investment in South Africa’s road infrastructure, a key enabler of economic growth and job creation, aligned with the objectives of the Government of National Unity. This aspect, when combined with Much Asphalt’s competitive offering, meant that the company would be well-positioned to play a meaningful role in the country’s road infrastructure spend over the medium to long term.
“Road infrastructure plays a pivotal role in enabling economic development, connecting South Africans and empowering previously disadvantaged communities in isolated parts of our country. Our investment in Much Asphalt is a continuation of our 21-year track record of investing in high-quality businesses which supply critical goods and services to their customers,” Sphere director Mohammed Sabi said.
The transaction marks the first and anchor investment in OMPE’s newly launched OMPE Fund VI. OMPE and Sphere will partner with the management team over the investment tenure and will seek to generate transformative growth and business transformation to generate a robust return on investment.
“We have confidence in the infrastructure repair initiatives under the new South African government and actively look to invest behind sectors that we think will recover to more normal levels over the medium to long term, compared to a volatile and abnormal last ten years for the South African economy. An effective road network is critical to the . . . rebuild that is underway in South Africa, which should stimulate economic growth and lead to the creation of new jobs,” OMPE co-head Jacci Myburgh said.
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