Black-owned firm snaps up Aveng's rail business

The R133 million deal will enable Mathupha Capital to become a fully-fledged railway solution provider.

Construction and engineering group Aveng has agreed to sell its rail business to a black-owned and managed investment company Mathupha Capital for R133 million.

Mathupa Capital will buy Aveng’s rail business for cash.The rail business that Mathupa Capital will be buying is focused on the development, construction, rehabilitation and maintenance of regional track work systems across southern Africa.

The business also owns and operates a fleet of mechanised track maintenance equipment geared to undertake all aspects of track construction, rehabilitation and maintenance.

Like other construction companies in South Africa, Aveng has been hurt by the country’s sustained slow economic growth which has impacted the government’s infrastructure spending. This trend has forced companies to sell their underperforming assets or voluntarily submit themselves into business rescue.

Aveng embarked on a strategic review in 2017 that included the sale of Aveng Trident Steel, Aveng Grinaker-LTA and Aveng Manufacturing.
The sale of its rail business to Mathupa Capital is part of its strategy to offload non-core businesses, said Eric Diack, the executive chairman for Aveng.

“We believe Mathupha Capital has the necessary expertise and market knowledge and is therefore ideally positioned to steward Aveng Rail into its next phase of sustainable growth and development,” said Eric.

Aveng will establish a limited liability private company called Aveng Rail NewCo, to which assets of Aveng Rail, including the short and long-term borrowings relating to the business, will be transferred.

Aveng Rail employees will also be transferred to Aveng Rail NewCo. And Mathupha Capital will then acquire 100 percent of Aveng Rail Newco from Aveng.

Aveng said the proceeds from the sale of the rail business (R133 million) will be used to strengthen the financial position of the company and will contribute to the overall reduction of Aveng’s debt.

The proposed transaction between Aveng and Mathupha Capital is subject to conditions including the conclusion of the final agreements and approval from the Competition Commission.  Aveng said the deal is expected to close no later than December 31, 2018, after all the conditions have been met.

Mathupha Capital is a level one Broad-Based Black Economic Empowerment investment company, which invests in strategic companies that design, engineer and construct transport infrastructure and manufacture products supplied to the rail sector.

As part of Mathupha’s growth strategy, it has been actively exploring opportunities in the rail sector to enable the company to become a fully-fledged railway solution provider and the proposed transaction will be an integral part of giving effect to that strategy.