Imperial’s takeover shines as marker for outside investment

(Alliance News) – Imperial Logistics Ltd’s acquisition stands as a beacon to local and overseas investors, reassuring that South Africa still proposes attractive value which is only being boosted by long-awaited national reforms as President Cyril Ramaphosa puts his foot down.

On Thursday, Imperial Logistics agreed to a ZAR12.73 billion takeover offer by Dubai-based logistics and supply chain services provider DP World Ltd.

Under the acquisition’s terms, DP World will acquire the Gauteng-based logistics firm for ZAR66 per share in cash, which reflects a 40% premium to Imperial’s closing price of Wednesday at ZAR47.30.

DP World specialises in cargo logistics, port terminal operations and maritime services.

The acquisition sent Imperial’s shares soaring to close 34% higher on Thursday at ZAR63.25 per share. On Friday midday, Imperial shares were down marginally to ZAR63.24 each.

Looking at the acquisition, Deal Leaders International Chief Executive Andrew Bahlmann told Alliance News on Friday that there are many synergies between the two companies which will benefit them both.

From Imperial’s point of view, the company gains DP World’s leading technology, global networks and key trade-lane volumes.

“Imperial’s stated objective as part of its growth ambitions is to develop a ‘Gateway to Africa’ strategy, which will be enhanced by the deal,” Bahlmann said.

In April, Imperial announced the USD100 million disposal of its South American shipping business which marked a turning point in the company where it plans to shift its portfolio of regional businesses to one integrated end-to-end logistics and market access business, focused on Africa.

For DP World, the acquisition not only means the expansion of its footprint on the African continent, however, but also Europe. Imperial’s Logistics International business being the key to unlocking this.

Bahlmann said: “The combination of DP World’s infrastructure, specifically in ports on the African and European continents, and Imperial’s logistics and market access platforms will enhance Imperial’s integrated end-to-end solutions along key trade lanes into and out of Africa and Europe.

“Ultimately, the transaction is about driving greater supply chain efficiencies, which will benefit all stakeholders.”

Imperial Logistics said Thursday that the acquisition would be DP World’s most significant investment on the African continent and would provide significant value by complementing DP World’s existing footprint in Africa and Europe, and adding to its digital capabilities across a wider network.

Imperial’s acquisition by a foreign company signifies that South African companies still offer considerable value, with many local companies being eyed from overseas, Peter Armitage, CEO of Anchor Capital, told Alliance News on Friday.

Armitage said: “There have already been quite a few [acquisitions] as global companies see value in the listed prices of SA companies.”

Armitage tipped that aluminium supplier and exporter Hulamin Ltd, industrial supplies firm Hudaco Industries Ltd, software company Adapt IT Holdings Ltd and logistics company Grindrod Ltd are all on the menu, adding that there are “many others”.

DLI’s Bahlmann said: “South Africa at the moment is offering considerable value and local business owners appear to have a tempered view of their businesses’ valuation – making the current environment ideal for cross-border and local mergers & acquisitions.”

The acquisition comes off the back of the global pandemic where many companies are looking to take advantage of lower price tags.

Bahlmann said: “We have seen a trend globally of companies improving their liquidity throughout the pandemic as companies used the occasion to stabilise their businesses and in many cases undertook rights issues. In some cases they may have specifically sought to bolster liquidity in the expectation that the crisis may reveal new opportunities for acquisitions arising out of the turmoil.

“We’ve seen this offshore, but it’s not yet taken off here. Many international listed companies have had new equity raisings and I would not be surprised if the value apparent in South Africa is being noted with growing interest.”

Alongside the Covid-stemming M&A rush, South Africa has started chumming local waters to attract overseas investors.

Just in the past couple of months, the limit on private-power generation has been lifted to 100 megawatts from a measly 1MW; government has sold off a majority holding in the tick of a national airline, South African Airways; and ex-president Jacob Zuma has put behind bars, reassuring the world that SA’s judicial system still stands on strong pillars.

“President Cyril Ramaphosa is at this moment making swift and welcome headway on the reforms investors have sought for many years to make South Africa attractive to foreign investors,” explained DLI’s Bahlmann.

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