INDUSTRIAL AND ENGINEERING
Invicta to raise market share as subsidiary agrees to buy Forge
Invicta Holdings subsidiary Invicta SA Holdings had entered into an agreement to buy Forge Industrial Group, it was announced on Thursday.
The value of the deal, which will entrench Invicta’s position in the industrial and engineering industry, was not disclosed.
Christo Wiese is a major investor in Invicta, a provider of capital equipment and engineering solutions. Forge will form part of Invicta SA’s Engineering Solutions Group, which makes up about 47% and 48% of Invicta’s sales and earnings before interest and tax, respectively.
Forge comprises importers and distributors of engineering-related products, machine tools and industrial conveyer belts and components. The company operates through 11 branches in SA, including three distribution centres in Gauteng, and sells more than 110,000 line items.
In 2011 the commercial and industrial interests of private equity firm Westbrooke were merged into an industrial business that became Forge.
Mpho Mokotso, an analyst at Avior Capital Markets, said the JSE announcement contained no information on how much Invicta expected Forge to add to its bottom line, "nor when the acquisition was effective. However, we suspect that this is a relatively small deal."
The transaction would further increase Invicta’s market share, Mokotso said. An expected upturn in the South African market should add traction to the buyout.
It was a hard slog for Invicta in the six months to the end of September 2017.
It reported a 2.7% rise in turnover to R4.8bn, amid poor trading conditions in SA’s industrial and mining sectors.
Profit from continuing operations rose 6% to R314m in the period. But headline earnings per share fell 7% to 225c.
Revenue for the Engineering Supply Group fell 3% to R2.27bn amid severe competition, with operating profit plunging 16% from R241m to R202m.
Invicta had said at the time that project work in the mining sector had nearly dried up completely, with only essential maintenance purchases being made by clients.
Neil Brown, co-head of Electus Fund Managers, said because the acquisition fell below the JSE’s announcement thresholds it would be less than 5% of Invicta’s market capitalisation, or less than R250m.
"With regard to the timing of the acquisition, the price is key, but often private equity type businesses have been well managed and are being sold as there is no more ‘easy money or value’ to unlock," he said.