WG Wearne continues to search for quarry buyer
The ready-mixed concrete and aggregates supplier says the exclusivity agreement with a consortium has lapsed
WG Wearne, one of SA’s oldest suppliers of building and construction materials, has resumed the search for a buyer of its 146ha Muldersdrift quarry after its nonbinding agreement with a consortium that was eyeing the asset lapsed.
The sale of the asset is part of a wider strategy to dispose of noncore assets and is supposed to ease WG Wearne’s cash flow pressure and concerns about liquidity.
The company has previously said its trading environment had become tougher because of declining economic growth, high levels of competition and an oversupply of cement in the industry. The company has said in the past that the oversupply of cement and lack of infrastructure spend by the government heightened competition in its key markets.
In January WG Wearne entered into a term sheet, which is a nonbinding agreement that contains terms and conditions of a deal, with AGW Consortium in relation to the Muldersdrift quarry, a granite quarry in Muldersdrift, near Krugersdorp. The company had identified the quarry as a noncore asset.
The consortium, made up of Furness Investments and GW Trading, wanted a so-called period of exclusivity to complete a due diligence and negotiations.
“The period of exclusivity has now lapsed between the AGW Consortium and the company. In the meantime, Wearne has been approached by other parties interested in purchasing the Muldersdrift quarry and are in negotiations with these parties including the AGW Consortium,” WG Wearne said.
Attempts to obtain comment from WG Wearne on Thursday were not successful.
The sale of the asset will improve the firm’s liquidity. In September 2017, the company announced a funding agreement with US private equity firm Milost Global. In terms of that equity and debt funding agreement, Milost Global was meant to invest up to R300m in Wearne. This included R50m investment for the subscription of ordinary shares and a loan and advance R250m in convertible notes. However, WG Wearne announced in May 2018 the termination of the transaction with Milost Global, saying the US firm had not fulfilled its obligations.
The company has since been in discussions with major shareholders regarding its recapitalisation.