Wrap Text
Proposed acquisition of Wagner Asia Equipment and withdrawal of cautionary announcement
Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06)
(Income Tax Registration number 9000/051/71/5)
(Share code: BAW)
(JSE ISIN: ZAE000026639)
(Share code: BAWP)
(Bond issuer code: BIBAW)
(JSE ISIN: ZAE000026647)
(Namibian Stock Exchange share code: BWL)
("Barloworld” or the “Company")
PROPOSED ACQUISITION OF WAGNER ASIA EQUIPMENT AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders are referred to the cautionary announcement published on 11 April 2019, and the renewal thereof
published on 20 May 2019, 2 July 2019, 14 August 2019, 27 September 2019, 11 November 2019 and
27 December 2019.
Barloworld shareholders are hereby advised that Barloworld Mongolia Limited (“Purchaser”), an indirect wholly-
owned subsidiary of Barloworld, has entered into an agreement (“Agreement”) dated 31 January 2020 with Wagner
Asia Group Limited (“Seller”) and Wagner International LLC (acting as the Seller’s guarantor), to purchase 100% of
the issued share capital of Wagner Asia Equipment LLC (“Wagner Asia Equipment”) and 49% of the issued share
capital of SGMS LLC (“SGMS”) (collectively, the “Target Companies”), for an estimated cash consideration of
USD216.8m (ZAR3.252bn¹) (“Purchase Consideration”) which is to be funded from existing offshore cash and
debt facilities (“Proposed Transaction”).
The remaining shares in SGMS will continue to be held by Battur Battulga, a Mongolian citizen actively involved in
managing SGMS which supplies equipment, parts and services to a key customer.
2. Information on the Seller, Wagner Asia Equipment and SGMS
Through Wagner International LLC and its subsidiaries, which include the Seller, the Wagner family have been
doing business in Mongolia for over 22 years. The Wagner family are a long-standing Caterpillar dealer in selected
states in the United States of America.
The Target Companies are engaged in the business of selling and distributing construction equipment, mining
equipment, power systems, and related goods and services in Mongolia, primarily under the Caterpillar brand.
3. Rationale
Barloworld seeks to create value by balancing our long-term growth ambitions while focusing on achieving
acceptable returns for our shareholders in the medium term. The group has consistently stated its desire to allocate
capital to opportunities that complement its competencies as part of its medium-term strategy. The group balance
sheet is strong and this opportunity, adjacent to the current Russian operation, presents an attractive growth
prospect within the Equipment division. The Wagner Asia Equipment business will be combined with the current
Barloworld Russian business unit into a newly formed Equipment Eurasia unit.
4. Terms and conditions of the Proposed Transaction
4.1 Purchase Consideration
The Purchase Consideration will be the sum of:
i. USD75m (ZAR1.125bn¹), for goodwill and intangible assets; and
ii. the aggregate value of the net assets of the Target Companies as at 31 March 2020, currently estimated
to be USD141.8m (ZAR2.127bn¹) (“Net Asset Value”).
The current estimated value of the Purchase Consideration is USD216.8m (ZAR3.252bn¹) based on the values
above.
The Net Asset Value will be subject to adjustments based on agreed valuation principles. The adjustments to
the Net Asset Value will result in either an upward or downward revision in the Purchase Consideration, and
this will be paid by the Seller or the Purchaser (as the case may be). The adjustments relate, inter alia, to
accounts receivable, work in progress, fixed assets and deferred tax, which shall be determined at regular
intervals, over a period commencing on the Effective Date (as defined in paragraph 4.3 below) and ending 24
months thereafter. These adjustments consider a full stock count on the Effective Date, together with a physical
inspection of asset categories.
The Purchase Consideration, together with the above adjustments to the Net Asset Value will be capped at a
maximum amount of USD265m (ZAR3.975bn¹).
4.2 Conditions precedent
The Proposed Transaction is subject to the following outstanding conditions:
4.2.1 the conclusion of various agreements with Caterpillar Inc (or an associated entity) in respect of the
Caterpillar dealership in Mongolia;
4.2.2 the carve-out, exclusion or transfer of non-core assets, liabilities, agreements, customers and debtors
held by Wagner Asia Equipment (“Carve-Out Assets”) prior to completion of the Proposed Transaction;
4.2.3 obtaining the consent and associated waiver of Battur Battulga, the other shareholder of SGMS, holding
51% of the shares in SGMS, to the Proposed Transaction and the entry into of a new shareholders’
agreement;
4.2.4 obtaining the consent(s) and/or waiver(s) from certain third parties in respect of certain rights arising
from the change of control contemplated by the Proposed Transaction; and
4.2.5 the necessary board approvals of the Seller, the Purchaser and Barloworld.
The Agreement contains certain representations and warranties by the Seller in favour of the Purchaser, and
by the Purchaser in favour of the Seller, as is standard for a transaction of this nature.
4.3 Effective Date
The Proposed Transaction will become effective on the date of fulfilment (or waiver, if applicable) of the
conditions precedent, which is expected to be on or about 1 April 2020, with a long stop date of 1 October 2020
(“Effective Date”).
5. Financial information
The unaudited unpublished pro forma management accounts of the Target Companies in respect of the 10-month
period ended 31 October 2019 (“Management Accounts”) show net assets of USD194.6m (ZAR2.919bn¹) and
profit after tax for the 10 month period of USD14.3m (ZAR214.8m¹). The Company confirms that it is satisfied with
the quality of the Management Accounts.
After conducting a due diligence, certain assets were selected to remain within the Seller’s group. This required
certain assets to be transferred out of the perimeter of the Proposed Transaction. After deduction of the Carve-Out
Assets, estimated at USD28.7m (ZAR430.4m¹) at 31 October 2019, referenced in paragraph 4.2.2 above, the value
of the net assets and the profit after tax attributable to the Target Companies is estimated to equate to USD165.9m
(ZAR2.488bn¹) and USD14.3m (ZAR214.5m¹), respectively.
The net assets remain the subject of specific valuation principles to be applied to inventory, receivables and rental
assets on the Effective Date. Applying these principles at 31 October 2019 would potentially result in a further
downward adjustment to the net assets of the Target Companies of USD24.1m (ZAR361.5m¹). These amounts will
however only be confirmed on the Effective Date.
6. Categorisation
In terms of the JSE Listings Requirements, the Proposed Transaction is classified as a Category 2 transaction for
Barloworld, which requires an announcement.
7. Withdrawal of cautionary announcement
As the terms of the Proposed Transaction have been published, shareholders are advised that they are no longer
required to exercise caution when dealing in the Company’s securities.
¹Converted at the ZAR/USD exchange rate of 14.9983 on 31 January 2020, on Bloomberg, being the closing
exchange rate on the business day before this announcement
Johannesburg
3 February 2020
Equity and Debt Sponsor:
Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Legal Advisor:
Freshfields Bruckhaus Deringer
Date: 03-02-2020 10:22:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
