Picture: THINKSTOCK
Picture: THINKSTOCK

The Competition Commission has recommended the proposed sale, without conditions, of Grindrod’s rail construction businesses to WBHO Construction and Faku Family Enterprises for an undisclosed sum, to the Competition Tribunal.

WBHO Construction is a wholly-owned subsidiary of JSE-listed construction stock Wilson Bayly Holmes-Ovcon, which operates across four main divisions: building and civil engineering; roads and earthworks; projects; and construction materials. These activities include providing civil engineering services for the rail sector.

"The transaction is still confidential between the parties and subject to final approval by the tribunal," WBHO spokeswoman Shereen Vally-Kara said on Thursday.

Faku Family Enterprises is an investment holding company with subsidiaries in the construction, property, coal, petrochemicals and related logistics services sectors. It is wholly-owned by the Ntinga Investment Trust. The purchasers intend to buy Grindrod Rail Construction and Grindrod Rail Construction Company from Grindrod Holdings. WBHO did not respond to requests for comment on Wednesday.

"As announced earlier this year, Grindrod is exiting the rail construction businesses. The value will be disclosed to all shareholders as part of the half-year reporting," Grindrod group financial director Andrew Waller said. Grindrod’s rail construction services include construction, rehabilitation, electrification and maintenance of rail networks, including for large industrial and mining customers.

The commission said the proposed transaction was unlikely to substantially prevent or lessen competition and did not raise any public interest concerns.

Grindrod mainly operates in freight services, shipping and financial services. In its results for the six months ended June 2016 it had a rail carrying value impairment of R675m. In the year to December 2016, the group recorded an attributable loss of R1.9bn amid extremely depressed market conditions in shipping and freight services, and the impairment of its rail businesses.

The latter was due to the postponement of capital investments in new rail infrastructure in Africa and "aggressive road-haulage rates".

"Given the subsequent anticipated inability to secure the desired, sustainable return in these businesses, the Grindrod strategy was reviewed and a decision taken to withdraw from the rail manufacturing businesses," the company said at the time.

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