South Africa’s Aveng will sell its rail business for R133 million ($9 million) to black-owned investment company Mathupha Capital, the construction firm said on Wednesday.
South Africa’s construction companies have been hurt by years of stagnant economic growth which has hobbled public infrastructure spending, prompting some to sell assets and file business rescues, similar to US Chapter 11 bankruptcy.
Aveng undertook a strategic review in 2017 which included the disposal of Aveng Trident Steel, Aveng Grinaker-LTA and Aveng Manufacturing.
“This is another step forward in our announced strategic intention to give effect to the sale of non-core assets for value,” Executive Chairman Eric Diack said in a statement.
“We believe Mathupha Capital has the necessary expertise and market knowledge and is therefore ideally positioned to steward Aveng Rail into its next phase of sustainable growth and development.”
Aveng will establish a limited liability private company called Aveng Rail NewCo, to which assets of Aveng Rail, including borrowings relating to the business, will be transferred.
Aveng Rail employees will also be transferred to the new entity and then Mathupha Capital will buy Aveng Rail NewCo from Aveng.
Proceeds from the sale will be used to strengthen liquidity and reduce Aveng’s debt, it said.
Aveng Rail is focused on the development, construction, rehabilitation and maintenance of regional track work systems. It owns and operates an extensive fleet of mechanised track maintenance equipment.
Construction peer Group Five has closed unsustainable construction businesses, with some businesses materially downsized, and said on Tuesday it will cut more jobs.