In its first acquisition since a record debut on the JSE in November 2006, black empowered building supplies group Afrimat Limited has acquired the Malans Group (“Malans”) in the Cape for R125 million. The earnings-enhancing acquisition adds strategically located quarries and sand mines to Afrimat’s portfolio, further boosting the group’s entrenched 45 year presence in the region.
Malans comprises four quarry operations and a number of sand mines in the Western Cape peninsula, Jeffrey’s Bay area and in Port Elizabeth as well as mobile crushing operations. This adds to Afrimat’s existing 18 quarries, 13 readymix plants, eight precast factories and four mobile crushing plants.
A portion of the purchase consideration will be funded out of Afrimat’s available cash resources on hand. In addition the group is placing a further 6,5 million shares with institutions at a price of R9,20 to raise R60 million to help fund the acquisition.
This acquisition is in line with Afrimat’s expansion strategy highlighted by CEO Andries van Heerden on listing. “A first-time entry into the Jeffrey’s Bay area is a step towards realising the group’s aim of national geographic expansion while Malans’ strong presence in Cape Town and Port Elizabeth, boosts the group’s urban presence”. He adds that urban expansion is a critical component of Afrimat’s growth strategy with further transactions in urban areas currently being considered.
He says that in addition to benefiting from Malans’ 40% share of the Western Cape sand market the new operations complement Afrimat’s existing product ranges particularly in sand and rubble crushing, providing clear synergies to boost future organic growth. Sand accounts for 40% of turnover at the Malans operations with quarries and mobile crushing accounting for around 26% and 19% respectively.
Commenting on the Denver Quarries element of the acquisition van Heerden says: “we had considered this operation as a standalone acquisition target even before it was acquired by Malans. It further enhances our presence in the Eastern Cape and its close vicinity to our Patcor Quarry provides opportunity to capitalise on synergies.” He is confident that Afrimat’s bottom-line focussed management approach will boost profitability for both quarries in the area.
Further, the acquisition has seen a significant increase in the group’s equipment and machinery inventory. “Currently redundant crushing equipment at the Malans operations and the Denver Quarries’ fleet of mobile equipment will be effectively utilised across Afrimat’s operations to drive revenue growth,” says van Heerden.
Van Heerden points out that Afrimat’s commitment to BEE is reflected in the terms of the acquisition agreement – 25,1% of the new shares being issued to the vendors as part payment of the purchase consideration are required to be placed with a BEE shareholder to maintain Afrimat’s solid BEE platform.
The acquisition follows a number of recent contract wins for Afrimat worth roughly R50 million which have set the group on track to meet 2007 forecast headline earnings per share of 50,5 cents. The transaction remains subject to the necessary approvals.
Afrimat provides a diverse product range of Mining & Aggregates, readymix concrete and concrete blocks and bricks. The group currently has a strong presence in the Eastern and Western Cape, Namibia, northern KwaZulu-Natal and Free State. The company debuted on the JSE on 7 November 2006 at R8,05 a share, a premium to the R5 a share costing in the pre-listing private placement. The listing market capitalisation of R1 billion has risen to R1,24 billion on closing yesterday at R10 per share.
