Barloworld said on Friday in a statement it had entered into negotiations for the management buyout (MBO) with a consortium of investors, acting through a newly established special purpose vehicle. If concluded, this will result in the consortium making an offer to acquire Barloworld’s shares.
The shares to be acquired exclude those acting in concert with the buyout consortium, namely the Barloworld Empowerment Foundation.
The acquiring consortium comprises Entsha Proprietary and Gulf Falcon Holding. Entsha is a South African company owned by The Katlego Le Masego Trust, an inter vivos trust established for Barloworld CEO Dominic Sewela and his family.
Gulf Falcon Holding is a subsidiary of the Zahid Group, a multi-disciplinary conglomerate headquartered in the Kingdom of Saudi Arabia, which is already an 18.9% shareholder in Barloworld.
The possible MBO elicited some questions on “X,” with users such as MarlieChunger (@JSE_Invest) commenting: “If the mandate of a CEO is to create shareholder value, is there a conflict of interest if a CEO wants to buy out other shareholders, which might be seen as an incentive to keep prices low?”
Urquhart Partners (@UrghartPartner) remarked: “Hot off the press, Barloworld has fleshed out its cautionary. The transaction is somewhat messy with the CEO potentially controlling the delisted entity….”
Gatehouse (@iamangegatehouse) wrote: “Barloworld; CEO: nakedly self-serving dual role, orchestrated alignment.”
On the JSE, the share price closed at R87.71 on Friday, which is 12.2% higher than the price a year ago, and just shy of the 12-month high of R98.22 reached in September.
Shortly after the initial approach received from the consortium, the Barloworld board of directors constituted an independent board to consider the proposed transaction and engage with the consortium.
“Given the nature of the consortium members and the involvement of the CEO, the independent board introduced clear and enhanced governance protocols to address any concerns that may arise from the CEO's involvement in the consortium and the proposed transaction,” Barloworld’s directors said.
They said that the engagement between the consortium and the independent board was ongoing. The consortium was also currently engaging with a number of other shareholders on the terms of the proposed transaction.
Barloworld’s board indicated that, at this stage, no firm intention to make an offer had been communicated by the consortium.
Meanwhile, the board also warned on Friday that headline earnings per share (HEPS) of Barlworld’s continuing operations were expected to decline by between 10.7% and 12.5% for the 12 months to the end of September 30.
Basic HEPS was expected to fall to between 1012.1 cents and 1032.1 cents compared with 1156.3 cents at the same time last year.
It said the decrease in the results was mainly due to the discontinued operations being excluded in the current reporting period.
Basic earnings per share were expected to decline between 13.9% and 15.6%, to between 1010.4 cents and 1030.4 cents.
The car rental and leasing business, Zeda, was successfully unbundled and separately listed on the JSE on December 13, 2022, while the logistics business was successfully disposed of, effective March 31, 2023. Both these businesses were included in the prior period as discontinued operations.
An online search showed that the Public Investment Corporation, which manages the South African government employee pension funds, owns the largest shareholding in Barloworld at 20.28%. Zahid Group Holdings holds 18.90%, Silchester International Investors holds 17.67%, while Coronation Fund Managers has a 4.87% stake.