The cash to do this will result after enX Group acquires Eqstra Holdings’s Industrial Equipment and Fleet Management divisions for R7.8 billion which the two companies announced on Thursday.
The deal will enable the recapitalisation of Eqstra’s Contract Mining division.
The transaction will see enX issue 52.7 million enX shares at R21.00 a share (post consolidation) to Eqstra to acquire the Industrial Equipment and Fleet Management divisions and raise R1.5 billion of which R1.4 billion will be used to recapitalise MCC.
Eqstra shareholders will receive a ratio of 0.13:1 enX shares for every Eqstra share and a retained share in MCC.
The contract mining business presents Eqstra shareholders with a levered opportunity to unlock value through a focused entry point into a well-capitalised mining services business.
The sector seems to be at or close to the bottom of the cycle and there are new opportunities to expand geographically and into new commodities and service offerings. MCC will be well-positioned to take advantage of these opportunities and be a potential consolidator of the industry.
The current Eqstra debt structure faces liquidity pressures over the next 24 months. This will be addressed through a new debt facility that has been negotiated with the banks and the extension of certain noteholder maturities.
This will result in a much less lumpy post-transaction maturity profile. In addition, enX will have sufficient immediate liquidity to address the first two years of the largest noteholder maturities.
This will facilitate a more sustainable balance between capital investment, debt repayment and potential returns to shareholders. This sustainable capital structure will unlock cash flow for investment in growth.
Paul Mansour, the current CEO of enX, will, with effect from the completion of the Eqstra transaction, assume the role of Executive Deputy Chairman of enX and Jannie Serfontein, Eqstra’s current CEO, will assume the role of enX’s CEO. The key executives of each of the underlying business will continue in their current roles.
The Board of Eqstra will be reconstituted and the Board of enX will be bolstered by the addition of certain existing Eqstra board members.
“Our vision is to build the next industrial powerhouse. This transaction with Eqstra represents an opportunity to take a significant step towards achieving this goal. We also have the prospect of building a dedicated and focused mining services business,” says Mansour.