R10billion expansion for shipping and logistics group, Grindrod
Business Day - Sep 21st 2011, 09:48
Shipping and logistics group Grindrod has big plans in place with deal involving Remgro to raise R2billion, will fund export infrastructure plans in Southern Africa
A "pipeline of projects" has been lined up by Grindrod as part of its strategic plan, now Remgro has stepped up to purchase just under 22% of the logistics company according to chief executive Alan Olivier.
"We’ve been involved in Maputo for some time as part of the port concession, where we own around 25% of that. Through that concession we own 100% of the coal terminal, and a large portion of the funding is going to be allocated to developing that asset," he told Summit TV.
"We recently increased capacity there from four million to six million tons – we are getting very good delivery from Transnet and a rail point of view through that facility, and we are seeing enormous demand from the coal miners wanting to export," said Mr Olivier in the interview, "so our plan now is to develop that facility, and immediately adjacent to that we plan to build a 20 million ton port."
The company has embarked on a feasibility study, and by the middle of next year should have board approval.
"That’s a very material investment – it will probably take three to four years to get that up and operational so it is quite significant."
The company has various other projects on the go – they want to develop the Richards Bay terminal facilities where they have capacity for around four million tons of coal growing that to more than 10 million tons, and the tank terminal business with their new partners in oil tanking. The company is also looking to expand their rail business.
"The Remgro deal converts to around 133 million shares at R15 per share," said Mr Olivier, "Remgro offering all shareholders – with the exception of the Grindrod family that controls a little over 18% who’ve undertaken not to follow their rights – so all shareholders are entitled to 28.67 shares per 100 shares they hold in Grindrod."
Mr Olivier says the company’s capital expansion plans could ultimately top R10billion where they would look at opportunities that are beyond the company’s balance sheet.
"We could introduce strategic investment partners into investments," said Mr Olivier, "but for now this transaction is adequate for our requirements."
Grindrod’s strategy to further develop their ports and terminals and grow the infrastructure business appealed to Remgro that had identified that infrastructure in this region was underdeveloped, and that there was enormous demand for commodities that could not currently find their way into the markets. This is what prompted their decision to invest.
"They don’t have management expertise in the areas where Grindrod does, so that’s where the relationship started."
The backing of shareholders was crucial to the Remgro deal, but Mr Olivier was confident of success.
"The feedback we’ve had in discussions with shareholders is positive – I’m very positive we will receive the support we need," he said.
Mr Olivier denied that Grindrod was growing unwieldy with the number of businesses in the group.
"We have divisional heads that are experts in their own area to look after the businesses. There is an enormous amount of interaction within the group – by way of example we are building a coal terminal where some of the coal we are receiving is transported by our bulk truck transport division."
With trucking, port and rail operations as well as terminal management and commodity trading – apart from its shipping mainstay – the company believes its history of running multiple logistics businesses will stand it in good stead as it seeks to grow still further.
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