Labat Africa holds takeover talks

11 Dec 2015

Labat Africa is in advanced talks with three companies regarding further possible takeovers. The investment holding company, which this year bought transport logistics group Reinhardt, said yesterday it was looking to acquire two dry-bulk logistics companies and a raw material bulk carrier in the private sector.

©Tracy Fox via 123RF (2)

The proposed acquisitions align with the company's stated strategy to create a large black economic empowerment transport and logistics business through a combination of organic and acquisitive growth. "We have received several approaches from white companies (with low empowerment credentials) to do business," black economic empowerment CEO Brian van Rooyen said yesterday. "This is one of the reasons we are increasing our exposure to transporting dry-bulk commodities, where we see a lot of opportunity." Labat has a level 1 empowerment ranking, which is the highest score.

Springboard into transport

Van Rooyen did not disclose the size of the stake Labat was negotiating over, but said it would be a controlling amount. Market analysts cite Labat's acquisition of Reinhardt, which was the springboard for its entry into transporting dry-bulk commodities, as the principal reason behind its share price rallying ninefold on the JSE's Alt-X from 15c on 1 January to R1.35 on 10 December.

Competition authorities have already approved the R560m deal, to be funded through debt and the issuing of new shares for cash. Shareholders are expected to approve the deal at a vote scheduled for next Friday, after which Labat will apply for a transfer to the main board's transport sector where Imperial and Super Group are listed.

Dry-bulk challenges

However, transport of dry-bulk has not been without its challenges this year amid plunging commodity prices and the scaling back of production by mining companies in a bid to protect profits. Last week, the Wall Street Journal published an article quoting research by Grindrod's UK-based shipping consultant Drewry, which said the market for shipping iron ore, coal and other commodities was unlikely to recover before 2017.

Shipping company Grindrod said in its half-year results, released in August, that it expected depressed commodity prices and dry-bulk shipping rates, although off their recent lows, to continue putting pressure on earnings in the near term. The company's share price has plunged nearly 28% since last month.

Source: Business Day

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