Saudi’s $1.2 Billion Barloworld Offer Gets Glass Lewis, ISS Nod

(Bloomberg) — Barloworld Ltd. shareholders should accept a takeover offer for the Caterpillar-equipment distribution business in Africa because it’s a good deal, according to recommendations by two proxy advisory companies.

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The offer by a unit of Saudi Arabia’s Zahid Group and local partners for 120 rand per share, or 23 billion rand ($1.2 billion), is fair value, according to Institutional Shareholder Services Inc. and Glass Lewis & Co. 

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The proxy companies said they also took into consideration independent due diligence by Rothschild & Co., which estimated the stock is worth between 105.53 rand and 119.43 rand per share.

“This proposal offers shareholders an attractive opportunity to exit the stock at a reasonable cash premium,” San Francisco-based Glass Lewis recommended in a note. Separately, ISS said “the offer is at an attractive premium.” 

The two companies didn’t comment further on emailed queries by the time of writing. 

London-based investor Silchester International Investors LLP — which holds close to 18% of the company — has said it will reject any price below 130 rand a share. Barloworld has scheduled a final shareholder meeting on the deal for Feb. 26 and needs backing from 75% of its investors to push the current offer through. 

Zahid’s Gulf Falcon Holding Ltd. and Entsha Ltd., an entity linked to Barloworld Chief Executive Officer Dominic Sewela, announced the offer in December. At the time, the bid was a 30% premium on the day’s closing price. The Saudi group started accumulating shares five years ago and holds a 19% stake. 

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The price is final and no higher offer will be made, according to people familiar with the matter, who asked to remain unidentified because the talks are private. 

The Saudi heavy-machinery group is betting on a surge in construction in Africa, driven by rapid urbanization, a growing middle class, and increased government investment in infrastructure. The industry could grow at a compound annual growth rate of 6.4% to $75 billion in market value by 2029, according to African online market-research firm Sabinet. 

South Africa needs about 4.8 trillion rand in infrastructure investment from the state and private investors to revive sluggish economic growth, President Cyril Ramaphosa estimates.

Companies from the Middle East are increasingly seeking investments in Africa as the region jockeys for influence with established players such as China and France. 

ACWA Power, a Riyadh-based company, has signed a memorandum of understanding to invest $10 billion in South Africa’s renewable-energy industry over the next decade.

Dubai-based freight giant DP World Ltd. operates nine ports on the continent and bought South African transport firm Imperial Logistics Ltd. 

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