The proposed transaction is subject to several conditions, including Competition Commission approval, but it is nevertheless expected to close by no later than December 31.
Previously known as Lennings Rail, AvengRail builds and maintains track networks across Southern Africa and owns and operates an extensive fleet of mechanised track maintenance equipment. The company employs some 350 people and its main plant is based in Boksburg East, in Ekurhuleni.
Mathupha Capital already has a presence in the rail sector through Rail 2 Rail, which manufactures sleepers for TransnetFreightRail at a factory in Kimberley, in the Northern Cape. Rail 2 Rail is led by chairperson Monde Africa and CEO Zimkhitha Zatu. The sale forms part of Aveng’s broader strategy of selling noncore businesses to focus on its Australasian constructiongroup McConnell Dowell and its South African opencastmining specialist Moolmans.
The noncore businesses were identified as part of a review process initiated in 2017 in a bid to stabilise the lossmaking group, which was facing serious liquidity and balance sheet pressures. Aveng has since restructured its balance sheet through a number of related transactions, including a R493-million rights issue and the implementation of an early redemption of a R2-billion convertible bond, due to mature in July 2019. Proceeds from the AvengRail sale will be used to further strengthen Aveng’s financial position and contribute to the overall reduction in debt.
Besides AvengRail, some of the other businesses earmarked for sale are Grinaker-LTA, Trident Steel, Dynamic Fluid Control, Automation & Control Solutions, Duraset and Infraset. Executive chairperson Eric Diack reported recently that expressions of interest had been received for all the companies, but he also indicated that Grinaker-LTA was unlikely to be sold to a single buyer.
The AvengRail transaction is the second disposal to be announced, with the first being the R245-million sale of the Jet Park and Vanderbijlpark properties. The business will be sold to Mathupha Capital as a going concern and all employees will be transferred to AvengRailNewCo.