South African company goes from Fortune 500 giant to takeover target

South African industrial giant Barloworld is set to be bought by a consortium of investors comprising Entsha (51%) and long-term shareholder Zahid Group (49%).

This would result in Barloworld’s delisting from the Johannesburg Stock Exchange (JSE) and becoming a privately held company.

Barloworld was founded in 1902 and rapidly became a company that was associated with the South African corporate giants of the 20th century, such as Anglo American and South African Breweries. 

It benefitted greatly from the mining boom on the Witwatersrand and surrounding areas for over a hundred years, supplying miners with equipment. 

Major Ernest Barlow borrowed £1,000 to form Thomas Barlow & Sons in Durban in 1902, basing the South African company on its English peer of the same name. 

The company initially sold woollen goods, blankets, and coats but quickly expanded to include engineering supplies within the first five years. It operated out of two rented rooms on Mercury Lane. 

In 1920, the company expanded to Johannesburg, just before Ernest Barlow died from wounds he suffered in World War 1. His wife, Anne Barlow, took over as its governing director in 1921. 

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. 

At this time, Ernest’s son Charles Sydney Barlow, called ‘Punch’, began distinguishing himself as an adept salesman.

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. 

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 also came under increasing pressure from a decline in mining production in South Africa as policy uncertainty and threats of nationalisation limit investment in exploration and expansion. 

Barloworld’s disposal of assets accelerated in 2006 when the company sought to continue its strategy of doubling the value of its business for shareholders by 2010. 

It completely unbundled PPC Cement and Coatings, and both were eventually listed separately on the JSE. Barloworld also sold its Scandinavian car rental operations. 

The trickle of disposals became a flood in the late 2010s when the company sold its Spanish equipment business and announced it would exit logistics in South Africa. 

It also exited its motor retail business, selling the unit to NMI Durban South Motors. In 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. 

Earlier this month, the company announced that it had entered into negotiations with a group of investors regarding the purchase of Barloworld. 

“Barloworld has entered into negotiations with a consortium of investors, acting through a newly established SPV, which, if concluded, will result in the consortium making an offer to acquire all of the issued ordinary shares in Barloworld,” it said in a statement. 

The investors are being led by the Saudi group Zahid, a distributor of heavy equipment machinery in the Middle Eastern nation. 

It had been buying shares of Barloworld four years ago. One of its units, Zahid Tractor and Heavy Machinery, owns 18.9% of the South African company.

On 11 December, a consortium, including Zahid and Entsha, an entity linked to Barloworld CEO Dominic Sewela, made an offer of R120 per share to buy the company. 

A deal may see Barloworld being taken private similarly to how Imperial Logistics was delisted after DP World bought it.