Aveng has entered a binding sale of business agreement and a subordinated loan agreement with Copaflo Fluid Control.
This is for the sale of the Aveng Dynamic Fluid Control business unit (DFC) as a going concern subject to certain conditions precedent.
DFC was identified as non-core as part of the strategic review and consists of its South African business, together with related foreign subsidiaries in Australia, Brazil, Finland and the United States.
Copaflo is a 100% black owned investment company which invests in engineering and manufacturing businesses.
Copaflo directly and indirectly owns 55% of the Fabchem Group.
Fabchem Group owns Fabchem Mining which is the second largest supplier of cable anchors in Southern Africa.
Aveng will sell the operations of DFC in South Africa, Australia, Brazil, Finland, and the United States as a going concern.
The Proposed Transaction consideration is R165 million, comprising the sale of business for R129 million payable to Aveng and the sale of property for R36 million payable to Dimopoint, an associate company in which Aveng holds 30%.
The business purchase consideration (excluding the aforementioned property consideration) will be subject to adjustment to reflect any changes in the net working capital position of DFC which may occur between 31 December 2018 and the effective date.
Accordingly, approximately R129 million will be settled in cash directly to Aveng on the effective date, R36 million to Dimopoint on registration of transfer of the property and an R11 million subordinated loan will be advanced by Aveng to Copaflo pursuant to the Proposed Transaction.
Copaflo has a funding agreement with the Industrial Development Corporation (IDC), which funding agreement terms are subject to the same conditions precedent as the Proposed Transaction.
The proceeds from the sale will be used to strengthen the financial position of Aveng and to reduce overall debt.
The Proposed Transaction is subject to the following consents and conditions precedent:
- Copaflo providing Aveng with a guarantee from the IDC;
- Approval being granted by, or notification given to, the various financiers who are a party to the Common Terms Agreement concluded with Aveng;
- Approvals required from the Financial Surveillance Department of the South African Reserve Bank, if required;
- Obtaining the consent of third parties to cancel or transfer financial guarantees;
- Finalisation of the transitional services agreement providing for the orderly carve out of the Target Business from the Group.