R23 billion lesson for South African companies 

The looming takeover of Barloworld by a consortium of investors led by the Saudi Arabian giant Zahid Group has proven to be more costly than initially expected. 

This is because the Takeover Regulation Panel (TRP) has ruled that Newco, the consortium taking over Barloworld, has to pay shareholders the full R120 per share initially offered. 

The consortium had tried to pay shareholders R118.80 per share after Barloworld paid out a R1.20 dividend to investors. 

While relatively small, the CEO of Deal Leader International Corporate & Advisory, Andrew Bahlmann, explained that this has turned a procedural matter into something that has material implications for all parties. 

The R1.20 difference in prices will add R225 million to the deal’s final cost and may result in some reputational risks alongside timing issues. 

This risks extending the process that has taken the best part of a year to conclude, with JSE-listed Barloworld set to leave the exchange after an illustrious history. 

The purchasing consortium includes Entsha (51%), a company heavily linked to CEO Dominic Sewela, and long-term shareholder Zahid Group (49%).

This acquisition will result in Barloworld delisting from the JSE and becoming a privately held company. However, the company will keep its name and remain headquartered in South Africa.

“In our experience advising on complex acquisitions, such disputes often stem from a lack of absolute clarity during the drafting phase,” Bahlmann said.

“Assumptions – whether about dividends, earn-outs or closing conditions – can be perilous. Parties under pressure to conclude deals may overlook or understate these details, only for them to re-emerge later as costly complications.” 

Bahlmann said that for South Africa’s corporate sector, particularly as international investors engage more deeply with local industries, the Barloworld case should serve as both a warning and a guide. 

Deals of this magnitude demand rigorous due diligence, meticulous drafting and transparent stakeholder engagement. 

“Every clause matters. Every assumption should be tested. And every deal, no matter how certain, deserves scrutiny to safeguard value and reputation,” Bahlmann said. 

Say goodbye to Barloworld as you know it

The looming takeover of Barloworld marks another chapter in the company’s illustrious history, with it once being a member of the Fortune 500 group of companies. 

Founded in 1902, Barloworld was one of the corporate titans of the 20th century in South Africa, being ranked alongside Anglo American and South African Breweries. 

The company benefitted greatly from the mining boom on teh Witwatersrand and the surrounding areas for over a hundred years, making billions from supplying miners with equipment. 

The fortunes of the Barlow family rapidly changed in 1927 when the founder of Caterpillar visited South Africa to find agents to distribute his machinery in the country. Barlow & Sons were appointed dealers for Natal.

The success of the Caterpillar deal catapulted the company on to the JSE, with it listing in 1941 as Barlows. Its opening price was seven shillings and sixpence per share.

To this day, Barloworld remains the exclusive distributor for Caterpillar equipment in South Africa and in various countries on the continent. 

Punch Barlow led the company’s transition into a sprawling conglomerate that straddled the South African economy in a similar vein to Anglo American. Barlows had business in motor retail, steel, equipment, and electronics by 1960. 

In the 1970s, it expanded into mining, buying Rand Mines and becoming Barlow Rand. It also began building interests in the US and UK, leveraging relationships to become exclusive distributors for IBM and Merck in South Africa. 

By 1994, the company was generating profits of over R1 billion a year, employed 240,000 people and was ranked 79th on the Fortune 500 list of global companies. 

Post-Apartheid, the company rapidly grew its overseas interests and changed its name to Barloworld in 2000 to emphasise its focus on its global reach.

After its centenary, Barloworld began disposing of some of its assets to focus on its core business. This marked the beginning of a transition away from growth to consolidation.

The company unbundled PPC, sold out of its Scandinavian car rental operations and disposed of its Spanish equipment business. It also exited logistics operations in South Africa. 

n 2021, it announced plans that by 2022, it would have sold its logistics business as well as its leasing business and car rental business. 

The car rental business, which operated under the Avis brand in South Africa, is now listed separately on the JSE as Zeda. 

Barloworld’s increasingly simple business, with a strong position in Southern Africa has made it attractive to foreign companies looking to invest on the continent.