Industrial equipment supplier Barloworld has confirmed that it is working to address “apparent violations of export controls” by its Russian subsidiary following an internal investigation by the group.

The internal investigation forms part of due diligence related to a consortium having made an offer to acquire Barloworld for R23-billion, or R123.10 a share.

The consortium, which made a buyout offer last year, comprises South Africa-based Entsha and Saudi-Arabia-based Zahid Group. A special purpose vehicle has been incorporated for the proposed merger, which is jointly controlled by Entsha and Falcon Holding.

The transaction would result in Barloworld delisting from the JSE and becoming a privately-held company, retaining its operations in industrial equipment, industrial services and agriculture in South Africa and 15 other countries worldwide.

Barloworld on September 2 submitted a voluntary self-disclosure report to the US Department of Commerce’s Bureau of Industry and Security. The report reveals that the internal investigation found no violations of US sanctions but indeed violations of export controls. 

The violations relate to potential breaches by Barloworld’s Vostochnaya Technica subsidiary, in Russia, which distributes Caterpillar equipment and various services to Siberian regions. The subsidiary has been scaling back its operations in Russia owing to operational pressure and shrinking market conditions owing to sanctions.

Meanwhile, the competition authorities in Botswana and South Africa have approved the buyout of Barloworld without conditions.

The only outstanding regulatory condition precedent for the proposed transaction relates to approvals by the Common Market for Eastern and Southern Africa, as well as competition authorities in Angola and Namibia.

The longstop date for fulfilment of all the conditions precedent to the transaction is September 11, which could automatically be extended by three months if any regulatory approvals are still outstanding.