Barloworld sells loss-making Iberian business
Barloworld, through its wholly owned UK subsidiary Barloworld UK, is selling its loss-making Iberian business Barloworld International to Italian group Tesa.
The group had been holding the assets and liabilities of its Iberian Caterpillar (CAT) earth-moving and power-generation equipment in Spain and Portugal for sale since the end of September 2017. Proceeds will stay offshore to fund growth initiatives.
The sale price is at a small premium to the net asset value (NAV) of the business at September 30 2017, or 6.4% of Barloworld’s market capitalisation at the date of signing of the agreement, which is expected to close no later than July 2.
The overall proceeds of the transaction calculated at €15.10 against the rand are estimated to be €160m.
The group’s share price fell as much as 6.76% on Wednesday.
“It is a good sale as NAV would have been good, so a small premium is slightly better,” Mark Hodgson, an analyst at Avior Capital Markets, said on Wednesday. He said Barloworld was looking for more CAT dealership opportunities offshore.
Tesa, through its subsidiary CGT, became the Caterpillar dealer for northern Italy in 1934 and in 2010 acquired the service territory for southern Italy. It subsequently became the sole dealer for the country. In 1990 it acquired the service territory of the Balkans region.
The sale price will be determined at the closing date using the shareholders’ equity that is attributable to Barloworld after negotiated asset impairments and an agreed premium.
Part of the purchase price, €10m, is deferred and payable in equal instalments over five years. On closing Tesa will settle a maximum of €142m in cash, subsequent to adjustment.
US-based Caterpillar has given consent for the deal.
Barloworld has been representing Caterpillar in Spain and Portugal for the last 26 years. The business employs about 1,075 people full-time.
The discontinued Equipment Iberia operations generated losses of R269m in the year to September 2017.
Damon Buss, an analyst at Electus Fund Managers, said on Wednesday the business had struggled for the past nine years. “The Iberia division has been loss-making since [financial 2009], except for a very small profit in [financial 2015], despite two significant restructurings,” he said.
Although Barloworld had secured a relatively good price for the business, it was “well below” where global competitors and the Barloworld group traded on a price-to-NAV basis.
As Barloworld had indicated in its most recent results it would like more CAT dealership territories in mining-focused markets, the capital received was expected to be invested “into one of these opportunities, should it come up”, Buss said.