Tribunal green light for Barloworld, but Silchester is the sticking point 

The proposed buyout of Barloworld shareholders by Newco, comprising the group’s CEO and Saudi Arabia’s Zahid Group, came a significant step closer to being finalised following the Competition Tribunal’s conditional approval of the deal last week. 

But the precise form of that finalisation won’t be known until late September.

If UK-based Silchester International Investors accepts the deal for its 17.2% shareholding, it’s likely Barloworld will be delisted before year-end. And, within 24 months of that delisting, the Newco consortium is required to implement two empowerment transactions. The first will be an employee share ownership scheme, which will be allocated 5% of the group’s equity. The second will be a women-led historically disadvantaged person (HDP) consortium, which will also be allocated a 5% stake. (These are collectively referred to as phase 2 of the HDP transaction.) 

However, if Silchester doesn’t accept Newco’s R120-a-share offer, Barloworld will not be delisted and these two broad-based BEE transactions will not be done. That’s even if Newco receives enough acceptance to get control of Barloworld. 

To be able to pull off a delisting, Newco needs to control at least 90% of the shares. It can then then squeeze out the remaining 10% of shareholders. If Silchester doesn’t play ball, this cannot happen. 

In its decision the tribunal said the BBBEE transactions would only be required if Barloworld was delisted. “It is recognised that implementation of phase 2 of the HDP transaction would not be practical in circumstances where the target firm remains listed,” said the tribunal. (Phase 1 of the HDP transaction is the retention of a 3.5% by the Barloworld Empowerment Foundation.) 

Holding out for more

Silchester, which has said it would only sell for R130 a share, is keeping schtum about its intentions. Analysts reckon it may hold out for a second, higher offer at this price, but in terms of the JSE regulations this second offer can only be made 12 months after the date the first offer is finalised. 

And it’s also possible other Barloworld shareholders, anticipating Silchester’s response, will also hold out for a second, higher offer.  

As of end June, Newco had received acceptances from 57.7% of shareholders, which means it will have control of Barloworld. The bulk of the acceptances are shares owned by the Zahid Group and the Public Investment Corporation.  

Newco is under no obligation to make a second offer, but counsel for the merging parties did tell the Competition Tribunal at the recent hearing that its intention was to acquire at least 90% and delist Barloworld. He also said only once the standby offer was made unconditional would the level of acceptances become evident.

“Once the standby offer is unconditional, shareholders have 10 days to tender their shares … shareholders usually wait until the last minute,” said Shawn van der Meulen, adding that it had previously been hoped the offer would be unconditional by early September. “The timeline might be delayed … we hope the transaction will be completed by mid-September, if all the conditions are met.” 

A second condition imposed by the competition authorities is a moratorium on retrenchments for two years from the date the deal is implemented. 

_{Top image: Barloworld CEO Dominic Sewela. Picture: supplied.}