Looking down the road
Was enough due diligence done for AECI's buyout of Much Asphalt?
The manufacturer of chemicals and explosives says its acquisition of Much Asphalt will ensure future growth
AECI’s R2.27bn acquisition of an asphalt company is either a masterstroke or the purchase of the most expensive lemon since Group Five bought Quarry Cats in 2006, according to insiders. One industry head with impeccable knowledge of the materials business says the price paid by AECI to buy Much Asphalt was "exorbitantly high" — and that he would have coughed up no more than four times earnings. Vunani Securities small and medium cap analyst Anthony Clark says: "I would lay money that [private equity seller Capitalworks] put the best possible dress on this. I’m very concerned when I see private equity selling at a fat price in a single-use industry in the current economic environment where government doesn’t have resources to implement its own policies. It seems completely insane," he says. Quarry Cats, incidentally, was bought by Group Five for R750m in 2006 at the peak of the cycle and sold a few years later, according to sources, for a R30m pittance. On p:e, AECI has paid a multip...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.