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M&R sells its Gautrain shares to a company from Holland

speed train coming into station
  • Murray & Roberts to sell its share of the Gautrain to a company from Holland.
  • Proceeds to be applied to Murray & Roberts’ working capital requirements as well as the debt reduction of SA.

A deal has been reached by JSE-listed Murray & Roberts (M&R) to sell its 50% stake in Bombela Concession Company (BCC), which runs the Gautrain, for R1.386 billion, Moneyweb reports.

With Holland-based Intertoll International Holdings BV, the multinational specialist engineering and contracting company has entered a sale and disposal agreement.

Leading European motorway concession investor Intertoll is also an independent toll and expressway construction designer and developer, concessionaire, equipment supplier, asset manager, and provider of specialized consultancy services to the European infrastructure and transportation sectors.

The fair value of these shares was R1.36 billion at 30 September 2022, after receipt of a dividend of R130 million and a fair value adjustment in the three months leading up to 30 September 2022, according to M&R. The purchase price payable for the BCC sale shares has been determined and agreed upon with reference to this fair value has been determined and agreed upon.

Needs for working capital

The proceeds from the proposed BCC transaction, according to M&R, will be used to pay down debt in South Africa and help the company meet its working capital requirements.

The group had R1.1 billion in total net debt at the end of its fiscal year on June 30, 2022, but on November 16, 2022, it announced that the group’s debt restructuring in South Africa had been successful, leading to a new term debt facility of R1.350 billion and an overnight facility of R650 million.

The fulfillment of a number of suspensive conditions, including shareholder and regulatory approval, is necessary for the proposed transaction to go forward.

Implementation of the proposed transaction is slated to take place in the first quarter of 2023, according to M&R and Intertoll.

One of the options the group was considering to raise the working capital needed to execute its R57.9 billion order book and R60.4 billion near orders at its end-of-August 2022 year end was to sell M&R’s 50% non-strategic shareholding in the BCC.

The order book for the ERI platform was kept at R37.2 billion at the end of August, but near orders, which now include the Inland Rail and Perdaman projects and have a combined value of about R40 billion, increased significantly from R1.1 billion to R43.6 billion.

Holland flag

Clough removal

The BCC sale and disposal agreement comes after M&R announced early last month that it intended to sell Webuild, a multinational Italian industrial conglomerate, 100% of Clough, its Australian subsidiary and the engine of its energy, resources, and infrastructure (ERI) platform and most important group business.

If the proposed Clough transaction is completed, M&R will benefit financially by about R4 billion.

Following the group’s cautionary announcement and trading statement on October 17, 2022, which described the company’s working capital requirements, which are particularly pressing in the ERI platform, M&R announced the proposed sale of Clough.

When the sale of Clough is complete, M&R will be divided into two business platforms for operational purposes: a global mining platform and a Power, Industrial & Water platform with a focus on sub-Saharan Africa.

Through RUC Cementation Mining, one of the three operating businesses in the group’s global mining platform, M&R’s interests in Australia will continue.

“Good price and result”

With a net asset value of R1.4 billion, Rowan Goeller, an analyst at Chronux Research, stated that it appears to be a fair price and outcome for M&R’s shareholding in BCC.

According to him, the stake in BCC is really just a way for M&R to generate annuity income that will soon come to an end. From a value and strategic standpoint, it makes little difference whether M&R sells the stake now or waits until it matures. However, M&R now benefits financially from turning it into cash.

They are left with a very strong mining division, which from a global perspective has respectable growth prospects, despite being a little sluggish in some regions, particularly in North America, primarily due to the impact of Covid-19, and a small contracts business in South Africa.

Through the connections between the loan from Clough to M&R and the Australian company connected to the Australian mining business, he claimed, “M&R dodged a bullet from Australia.”

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Goeller continued, saying that while M&R lost a potential growth division, it avoided having a significant hole in its balance sheet.

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