Zahid offers R22.8bn for Barloworld

The Saudi heavy machinery group is betting on a surge in construction activity on the continent.

Saudi Arabia’s Zahid Group and its local partners offered to buy out Barloworld in a deal that values the South African construction equipment company at about R22.8 billion ($1.3 billion).

Zahid’s Gulf Falcon Holding and Entsha, an entity linked to Barloworld Chief Executive Officer Dominic Sewela, offered R120 per share, the companies said in a statement on Wednesday, confirming an earlier Bloomberg News report. That’s a 30% premium to Tuesday’s closing price for the Johannesburg-based company, which is Africa’s distributor for Caterpillar equipment.

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The Saudi heavy machinery group is betting on a surge in construction activity on the continent. The industry is set to grow almost 27% by 2029 in Africa, boosted by government infrastructure investments and a stronger consumer market, according to a report from market data firm Mordor Intelligence. South African President Cyril Ramaphosa has said that as much as R4.8 trillion in infrastructure investment from the state and private investors is needed to revive sluggish economic growth.

Read: Dominic Sewela-led consortium in Barloworld takeover talks

Barloworld will still pay investors the R3.10 dividend that the company declared last month, and investors would get the payout in addition to the R120 offer price, the company said in the statement. Barloworld will be delisted if the deal goes ahead.

Barloworld’s shares jumped as much as 22% to R113 at 2:08 p.m. in Johannesburg trading on Wednesday. The stock has increased 37% this year.

The Saudi group, which started buying Barloworld shares four years ago and already owns about 19% of the shares, approached the company’s board in February. At that point Barloworld’s shares were in decline, falling more than 25% during the previous 12 months, and the company was working to recover from a slowdown after the Covid-19 pandemic. In August, the company told investors that it was in talks that could impact its share price following a Bloomberg report on its discussions with Zahid.

Read: Barloworld CEO accused of conflict in potential buyout by Saudi-led consortium

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Middle Eastern companies have increasingly sought investments in Africa, jockeying for influence with established players such as China and France. ACWA Power, a Riyadh-based company, has signed a memorandum of understanding to invest $10 billion in South Africa’s renewable-energy industry over the next decade, while Dubai-based logistics company DP World operates nine ports on the continent.

Barloworld is the official Caterpillar dealer in several African nations including Zambia, the Democratic Republic of Congo, Malawi, Angola and South Africa. It also has a business in Russia that’s been subject to an internal investigation into possible export violations.

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