Grindrod, Racec acquisition approved
Engineering infrastructure business Racec on Thursday announced that all outstanding conditions attached to the proposed acquisition by Grindrod of Racec’s entire share capital – other than the 25.1% held by Solethu Civils – had been fulfilled.
The acquisition had been approved by the Competition Tribunal on October 15 and a Companies Act compliance certificate was received from the Takeover Regulation Panel on August 6.
Racec and Grindrod announced the acquisition, in July, stating that Racec has suffered “severe cash flow pressure,” owing to protracted contractual disputes associated with a final contract close-out in Sierra Leone, as well as delays in “significant contract awards”.
Racec had also been formally notified of the breach of its debt service cover ratio covenant by Absa Bank and Grindrod Bank – the provider of its R45-million short-term mezzanine funding facility.
In addition, Racec required between R3-million and R5-million a month in working capital funding for its business and operations, with limited resources to fund these cash outflows in the near future.
As a result, Racec’s financial position was “extremely precarious”, and failing the implementation of the share acquisition, it warned that the options available to the engineering group would “be extremely limited” and would, in all probability, “result in significant erosion of value and the inability to fund working capital requirements and settle debt”.
Grindrod would pay the undisclosed purchase consideration to certificated Racec shareholders on November 4, after which the listing of Racec shares on the JSE would be terminated on November 5.
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