Hudaco acquires Brigit group for R315m as part of diversification strategy

Industrial group Hudaco, which specialises in importing and distributing automotive and electronic consumable products, has acquired the Brigit group for up to R315m, gaining a foothold in the fire detection, containment and suppression market.

The move is in line with cash-flush Hudaco Industries’ strategy to diversify and acquire new businesses in similar fields of activity to its current offerings.

Hudaco, which has a R4.7bn market capitalisation on the JSE, has been managing its capital allocation to invest in acquisitions, pay down debt and repurchase shares while distributing dividends. 

The firm, which has been vocal about its disappointment in how the state machinery is run, first announced the agreement to acquire the trading assets and liabilities of Brigit with effect from September 1 at the end of May, pending the fulfilment of the final suspensive conditions.

Hudaco on Monday told shareholders that “all suspensive conditions have now been fulfilled so the acquisition of the trading assets and liabilities of Brigit is unconditional and will become effective from September 1 2023.”

According to the Johannesburg-based industrial firm, the Brigit business is an ideal fit in that it focuses on supplying quality, branded products and services while providing significant value-add for the customer, which is an area of core competence of Hudaco.

The Brigit group of companies, which was established in 2003, has 65 employees in three locations across SA. Brigit reported R36m in net profit after tax in the year to February and has committed to deliver a minimum of R55m net trading assets on the effective date.

It develops and offers “one source total fire protection” solutions that include fire detection, fire containment protection and fire suppression systems for commercial and industrial applications throughout Sub-Saharan Africa.

Brigit’s fire security offering will complement and enhance the range of products and services that Hudaco already offers to the security sector through its Elvey Security Technologies and Pentagon businesses.

The two businesses are set to work together in developing their route to market and expanding their combined customer base with Hudaco using its experience and expertise in value-added distribution to enhance Brigit’s market position, resulting in long-term benefits to shareholders.

The beneficiaries of the up to R315m deal, which was approved at the end of July, are the Van Zyl Trust, whose beneficiaries are businessperson Deon van Zyl and his immediate family members.

The maximum purchase price is subject to the company’s achieving certain profit targets over the next two years.  

To fund the transaction Hudaco said it would pay out two tranches from its cash generation and, if necessary, obtain new facilities. It said this would be after an initial amount of R143m was payable in cash on the effective date.

In its latest results, where it hit out at the government’s failure to repair crumbling infrastructure, create jobs and tackle rampant corruption, and for its stance on the war in Ukraine, Hudaco upped its interim dividend 8.3% year on year to 325c, amounting to a payout of R196m, while net profit grew 0.3% to R293m.

Headline earnings per share, a common profit measure in SA that excludes certain items, improved 8.1% to 926c, helped by the decrease in the number of shares as the company bought back R112m in shares.

Its acquisition strategy to diversify the revenue base and to reduce dependence on the group’s traditional core markets of mining and manufacturing, has seen Hudaco make several significant acquisitions in the past decade, including Filter and Hose Solutions, the Dosco group and Miro.

It has also acquired automotive aftermarket Partquip while many smaller businesses have also been acquired.

Hudaco’s share price fell 2.59% to R149.04 on Monday, having gained more than 11% during the last year.

Correction: August 28 
In a previous version of this article, it was stated that the deal value is R315m, whereas the value amount is up to R315m and is subject to the company meeting certain profit targets. Business Day regrets the error.

gumedemi@businesslive.co.za