JOHANNESBURG (miningweekly.com) - Private equity groups Ethos and Old Mutual Private Equity announced on Wednesday that they had purchased a combined 44% of industrial-minerals company Idwala Industrial Holdings, but declined to disclose the value of the transaction.
Under the new structure, Ethos would own 27% of Idwala, Old Mutual 17%, while black economic-empowerment company Tiso would reduce its shareholding to 30%, but sustain its position as the largest single shareholder in the company. Management would hold the balance of the shares.
RMB Ventures, a previous investor in Idwala, would exit entirely, realising value from its four-year investment in the company.
Tiso’s Nkululeko Sowazi would remain on as chairperson, while James Welsh and Wayne Brown were appointed MD and deputy MD respectively, following the retirement of the former leadership.
Ethos dipped into its $750-million “Fund V” to finance its portion of the transaction, while Old Mutual Private Equity financed its investment through its Private Equity Fund II.
Nedbank Capital arranged and underwrote the debt package, and would, together with Rand Merchant Bank, continue to be a main funder to Idwala.
Ethos and Old Mutual declined to comment on the final balance between the debt and equity portions of the transaction, but Ethos Partner Stuart MacKenzie and Old Mutual Private Equity portfolio manager Jacci Myburgh confirmed that the capital structure involved far less debt than past private-equity deals, owing to current debt-market constraints.
All the partners were, however, extremely pleased that the deal had proceeded, despite some material market headwinds; a reality alluded to strongly by Nedbank Capital’s Mark Sardi, who said that the transaction had been concluded in the face of “extremely difficult economic conditions”.
“Clearly doing any kind of debt transaction in the current environment is particularly challenging,” Ethos partner Anthonie de Beer told Mining Weekly Online.
But he stressed that deal had been facilitated primarily by Idwala’s strong business fundamentals, as well as the “prudent” capital parameters employed.
That said, Old Mutual’s Myburgh stressed that there was still debt capital available in South Africa to support some of the current deal flow in the market, provided that more conservative view was taken with regard to the acceptable level of transaction leveraging.
The unlisted Idwala is a vertically integrated supplier of processed lime, calcium carbonate and other industrial minerals.
It has operations in the Northern Cape, producing burnt and hydrated lime for the gold, base metals, chemicals and pulp industries; and Port Shepstone, producing a fine-white calcium carbonate powder, used as a filler and extender in the production of paper, plastic, paint and a range of other products.
MacKenzie indicated that the new owners were keen partner with Idwala through the “next stage” of the company’s development, highlighting, in particular, the group’s access to additional limestone deposits.
Organic & Acquisitive Growth
Idwala’s Welsh welcomed the new ownership structure, arguing that it would position the company to pursue organic and acquisitive growth prospects.
He told Mining Weekly Online that Idwala had recently reviewed its capital expenditure and sales plans for the year and indicated that the company was set fair to meet its budgets, despite the generalised slowing of the economy.
This resilience was attributed to the diversity of the company’s product portfolio and the breadth of markets served.
Welsh said the group, which emerged a number of years ago as a result of the unbundling of Anglo Alpha cement, had a range of efficiency and expansion projects already under way in the Northern Cape and at Port Shepstone – the other company to have emerged from that process was cement producer Alpha, which was initially re-branded as Holcim, but which currently trades as Afrisam.
But he believes there was a particularly growth opportunity associated with lime’s growing importance and prominence as an agent in cleaning up air and water effluent, particularly pollution arising from process industries and the mines.
“We believe demand for environmental applications is really going to grow over the next five to seven years,” Welsh asserted.
Ethos and Old Mutual indicated that they intended to help grow and develop the business over a similar time horizon before seeking an exit, which could take the form of either a trade of financial sale, or an initial public offer and listing.
The company had also made submissions to the Department of Minerals and Energy for the conversion of its minerals rights and it was optimistic of a positive response in the not-too-distant future.