Group Five has partnered with a subsidiary of the UK-based Aberdeen Asset Management, as the JSE-listed engineering and construction group seeks to bolster its offshore profit line.
The company segments itself into three broad categories: engineering and construction, manufacturing and investments, and concessions that have taken strain over the past few years because of their exposure to weak productive sectors.
One such area has been mining, which until fairly recently has lagged because of weak commodity markets.
Group Five agreed on Monday to sell a 49.99% stake in Intertoll Europe’s underlying equity investments of about R633.2m to Aberdeen Infrastructure Funds (AIF) in a cash deal that is expected to close in June 2017.
The proposed transaction is intended to benefit the investments and concessions division, which contributed less than 10% to revenue in the year to June, yet still managed to make a sizable contribution to profit growth. Engineering and construction generates the bulk of the revenue.
The JSE-listed group owns Intertoll Europe, which develops and operates tolls and motorway infrastructure. The news sent its share price up nearly 10% to R25.38 on the JSE, valuing the company at R2.8bn.
The proposed deal would enable Group Five to source and participate in more global concession assets, with the potential to procure new operations and maintenance roles in the future, without having to invest large amounts of capital solely.
“The transaction creates a strategic alliance between Group Five and AIF to support the growth of the company’s existing PPP [public-private partnership] business,” the company said.
The total value of Intertoll Europe’s PPP project investment portfolio stood at about R1.14bn as of June and the operating profit was R750m.
The small company is targeting new markets for growth to bolster its position further as one of the largest private road operators in Southern Africa and Europe. New projects are under development or evaluation in Turkey, Ireland, the Czech Republic, Norway, the Balkans and in Russia.
The Intertoll Europe business, with international infrastructure financing partners, acquired 12.7% of the M6 Phase 1 project in Hungary during the past financial year.
Aberdeen Asset Management is one of the globe’s largest asset managers and is listed in London with a market capitalisation of about £3.6bn.
source: Business Day