Bidvest builds R15bn war chest for acquisitions

Industrial conglomerate Bidvest announced it has successfully renegotiated its offshore funding facility with Citibank London and Standard Bank among others, arming itself with an additional R5bn as it goes on the hunt for acquisitions internationally and in SA.

Bidvest’s replenished merger & acquisitions (M&A) budget is good news for investment bankers, starved of meaningful deals in recent months as SA firms deploy cash reserves to mitigate the effects of the debilitating power cuts on operations.

Sub-Saharan Africa’s M&A activity plummeted 80% in the first quarter of the year, reaching the lowest first quarter since 2003 and halving fees earned by investment bankers, according to data from Refinitiv.

Bidvest, which has interests spanning cleaning services and vehicle and freight management, said the newly altered funding facility of €750m (R15.2bn) not only replaces and supersedes the previous £460m (R10.8bn) facility, but demonstrates prudent liquidity management to renew the facility well ahead of the maturity date.

“The amended arrangement has a greater revolving credit facility, which allows for M&A funding flexibility at only a slight increase in funding margin for a three-year term, with two one-year extension options,” Bidvest said in a statement.

A spokesperson for Bidvest said the increased facility puts the company in a position to execute on future potential M&A opportunities, with funding capacity already secured. The Bidvest guarantee of €862.5m provided in terms of this facility also covers additional accordion funding, if required.

“The facility is primarily in place to fund acquisitions and will be drawn upon as and when required,” said the spokesperson.

Expansion

The Johannesburg-based firm alluded to acquisitions brewing in the pipeline, saying: “Focus on the group’s international expansion strategy remains on course, with several possible corporate action opportunities, both locally and offshore, at different stages.

“The anticipated acquisition pipeline can be completed within the current funding capacity of the group,” Bidvest said.

Founded three decades ago, Bidvest’s portfolio spans services, freight, consumer and commercial products, financial services and automotive, and is arguably considered a proxy for the performance of the economy.

The R86.7bn JSE-listed firm has been on the hunt for acquisitions after getting a boost from Covid-19-related demand for better hygiene.

CEO Mpumi Madisa has told Business Day that Bidvest does not want to duplicate itself abroad, but rather complete strategic acquisitions. Offshore, it will continue to look for opportunities in three niche areas — facilities management, hygiene services and plumbing and related services.

She is confident that the group has the financial muscle to pull it off.

In its interim results, Bidvest delivered a double-digit revenue rise at 14% while headline earnings per share came in 15.3% higher. It reported R17bn in unutilised facilities domestically and a £240m offshore war chest.

The group acquired Australian cleaning specialist BIC Services for A$163m last July as part of its bid to expand its international footprint, while it also bought the Roan Systems Group of Companies (RSG) in April to beef up the Bidvest data, print & packaging division.

In its voluntary trading update for the 10 months to the end of April published on Thursday, Bidvest said operational cash generation remained robust in the period while its financial capability to continue investing strategically in working capital remains a key competitive advantage.

Alternative energy

In the period, Bidvest said it managed to capitalise on the growth nodes within the agriculture, mining, renewable energy as well as the travel and tourism industries.

It also reported that despite a weakening macroeconomic backdrop, demand for alternative energy products accelerated while corporate, mining and industrial demand for everyday essential products remained robust in an increasingly competitive market.

However, it warned that factory efficiencies, mainly during times of electricity load-shedding, and distribution costs are key pressure points.

Additionally, it flagged real wage increases as another pressure point across all operating territories but assured shareholders that management is actively engaging with customers to recover this cost.

Results for the year ending June 30 are expected on or about September 4.

Bidvest shares closed 1.35% higher on Thursday at R258.04.

gumedemi@businesslive.co.za