BUILDING: Portland: We Told You So
Recent Western Cape Business News
CBN’s suggestion that JSE listed WG Wearne would sell off its struggling Western Cape Portland operations has come to pass.
Last month Wearne – still labouring under a punishing debt load and struggling for new business – announced an agreement to sell back the Durbanville-based Portland businesses to the original vendors.
The vendors comprise the Anco Besigheids Trust, Willchrest Besigheids Trust and Portland Readymix Trust.
Ironically, the sale has been concluded at the very time Wearne should have been looking to buy Portland rather than facing the prospect of selling out at a massive loss.
The move, while necessary to relieve a strained balance sheet, is a blow to Wearne’s ambitions to diversify into a national building supplies player.
Following the deal Wearne will have no foothold in the Western Cape.
In fact, a restraint clause tagged to the deal prohibits Wearne from plying its trade in the Western Cape for one year. That’s probably some comfort to the vendors who are buying back their businesses at a tough time for the regional economy for suppliers of ready mixed concrete and aggregate, road building material and concrete products.
The deal is being executed by the Portland vendors returning 56.6m Wearne shares originally issued to them as settlement for Portland’s assets. The value of the returned shares – at Wearne’s current share price is less than R20 million. When Wearne bought Portland the value of the deal was north of R100 million, which means a rather painful exit over a short period.
For Anco, Willchrest and the Portland Readymix Trust - the vendors who sold the business to Wearne in 2008 – there is a chance to pull back ownership of businesses that the trio had controlled for the best part of two decades.
Presumably the vendors believe they have better chance of turning Portland - which (as reported in CBN in August) is generating sizeable losses – than if the business remained in the diversified Wearne group.
Attached to the deal is an agreement that Wearne will also sell Portion 8 of the Farm Hoogekraal No 1098 in Bellville together with the lease agreements with Portland Hollowcore Slabs (Pty) Limited and Portland Readymix to Scholgard for R30 million.
Officially, Wearne blamed the global financial crisis and collapsing commodity prices for the decline in demand for building supplies products.
The company said the Western Cape construction market, in which Portland operates, was especially affected by this downturn.
“The directors have accordingly decided that the transaction is in the best interest of the company as it will assist in the streamlining of its operations as well as reducing debt and working capital requirements.”
Wearne will mobilise the cash portion of the disposal to reduce debt and for working capital.
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