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Imperial to net up to R1.45bn from South American shipping business sale

Exit forms part of its strategy to focus on its operations closer to home, serving as a ‘gateway to Africa’.
The group says it plans to use the proceeds to reduce its debt and invest in ‘new growth areas’. Image: Supplied

JSE-listed logistics giant Imperial has finalised the sale of its loss-making (after tax) South American shipping business to São Paulo-based Hidrovias do Brasil in a deal that could net it up to R1.45 billion.

Announcing the sale in a JSE Sens statement on Monday, Imperial said it “closed” the transaction on April 16. Hidrovias is an independent integrated logistics provider focused on waterways logistics services in Latin America.

The transaction is linked to certain conditions, including an “earn-out component” related to water levels that the shipping business will operate in, over a four-year period (2021 to 2024). However, from a regulatory perspective, the deal is not subject to any outstanding conditions or regulatory approvals.

“The maximum aggregate purchase price, payable in cash, for the interest in the South American operations is approximately $100 million [approximately R1.45 billion], which includes ‘locked box’ interest from 1 July 2020 until the closing date as well as the full earn-out payment,” Imperial noted in its statement.

Imperial’s exit from South America comes just seven years after its foray into the region as part of an international expansion.

Now the group has launched a ‘One Imperial’ strategy aimed at serving as a “gateway to Africa for its clients, principals and customers”.

The sale of its South American shipping business follows the disposal of its European shipping business, which was concluded in July 2020.

Read: Imperial Logistics prepares for European exit

“Imperial is transforming from a portfolio of regional businesses to an integrated end-to-end logistics and market access business that is focused on Africa, leveraging its scale, competitive advantages and capabilities in the healthcare, consumer, chemicals, automotive, and industrial and commodities industries,” it reiterated in the Sens statement.

‘Non-core’

“As such, Imperial has thoroughly assessed the strategic fit of its Logistics International business and decided to exit this business in a phased approach as it is non-core,” it added.

“The remaining freight management and contract logistics operations within the International Logistics business remain for sale and Imperial is in the process of disposing of these, as announced at the group’s 2021 interim results on 23 February 2021,” the group noted.

Imperial said that the proceeds from the South American sale would be used to optimise its financial position by reducing its overall existing debt in the short term and investing “in new growth areas in line with the group’s strategy”.

The South American shipping business operates in the Hidrovia-Paranha-Paraguay waterways and has access to the largest seaports in the region.

Read: Imperial to retrench about 1 000 of its SA employees

According to Imperial, the business has a large and sophisticated fleet of more than 90 owned vessels and moves around 1.6 million tons of diversified products (dry bulk cargo) every year in the region. It employs around 150 people.

“The South American shipping business generated revenue and earnings before interest, taxes, depreciation and amortisation [Ebitda] for the year ended 30 June 2020 of [circa] $36 million and $9.4 million respectively [approximately R522 million and R136 million respectively],” it noted.

However, the business reported an unaudited attributable loss after tax for the six months ended December 31, 2020 of $4.7 million (approximately R68 million).

The South American shipping business’s unaudited net asset value as at December 31, 2020 was $110.3 million (approximately R1.6 billion).

Imperial’s group share price closed just over a percent up, at R48.65, following the sale announcement on Monday.

The group has a market capitalisation of around R9.8 billion.

The group has a market capitalisation of around R9.8 billion.

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Another local company that has failed and incurred substantial losses in overseas ventures and markets abroad. Its strategy to focus on its operations closer to home may just succeed!

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