Supply chain management and logistics company Super Group’s 53.58%-owned subsidiary SG Fleet has entered into a scheme implementation deed with Westmann Bidco, an entity owned and controlled by funds managed and advised by Pacific Equity Partners (PEP), under which Bidco has agreed to acquire 100% of SG Fleet shares for a cash consideration of A$3.50 a share.

This development follows an announcement by SG Fleet Group on November 25, advising shareholders that it was in discussions with PEP and certain of its affiliates regarding a nonbinding and indicative proposal from PEP to acquire all shares in SG Fleet.

Should the scheme be implemented, Super Group, through its wholly-owned subsidiary Bluefin Investments, will dispose of its interest in SG Fleet for A$641.4-million.

The board of directors of Super Group has stated that they believe the transaction is in the best interests of Super Group shareholders because the transaction will create a liquidity event for Super Group after years of investment in SG Fleet, while allowing the group to continue its involvement in integrated logistics, transport, and mobility solutions.

The board said the transaction offered shareholders an opportunity to unlock material value in SG Fleet in the immediate term and realise a significant premium compared with the estimated value of SG Fleet as reflected in Super Group’s share price.

The offer price of A$3.50 a share represents a 31% premium to the SG Fleet closing share price on November 22 and a 30% premium to the one-month volume-weighted average price.

Additionally, the board believes that the transaction demonstrates the market’s significant undervaluation of the remainder of Super Group’s business.

The board believes that the transaction will enable Super Group shareholders to realise longer-term value upfront. Given the historical valuation of SG Fleet as reflected in Super Group’s share price, the board advised that there could be no guarantee that future value creation through SG Fleet would be fully reflected in Super Group’s share price.

Super Group plans to use up to R1.96-billion of the proceeds to reduce its debt. The net gearing of 171.8% as of June 30 is estimated to reduce to 22.8%, and the group’s net debt to earnings before interest, taxation, depreciation and amortisation ratio of 2.96x as of June 30, is estimated to decrease to 0.77x on a pro-forma basis. This will result in a moderately geared balance sheet that mitigates risk.

Following the completion of the proposed transaction, Super Group believes it will be strongly positioned as diversified logistics and mobility solutions provider in sub-Saharan Africa, Europe and the UK.

It expects to maintain a resilient, flexible and sustainable financial profile with a strong cash generation ability. Super Group plans to optimise its sub-Saharan Africa and international growth potential through its Supply Chain, Fleet Africa and Dealerships divisions.

The board says the implementation of the proposed transaction will enable management to focus its capital allocation priorities on accelerating the supply chain and dealerships strategy in Africa, Europe and the UK.

Following the proposed transaction, Super Group will have a simplified group structure with a single listed entry point.

Additionally, the group will retain exposure to hard currency earnings, while benefitting from an increased proportion of earnings from South Africa and sub-Saharan Africa, which are highly correlated to macroeconomic recovery.