Zimplow, a manufacturer and distributor of agricultural, mining and construction equipment, has announced plans to acquire businesses that will see the Zimbabwe Stock Exchange listed company diversify into the transport and logistics industry.
The proposed deal will see Zimplow acquire the entire shareholding of the sole distributor of Scania products in Zimbabwe, Scanlink (Private) Limited, the exclusive distributor of the Goodyear brand of tyres in Zimbabwe, Tredcor Zimbabwe (Trentyre), as well as an industrial stand in the Southerton area.
Scanlink, and Tredcor Zimbabwe are said to be industry leaders in their respective product categories in Zimbabwe.
According to the information contained in the circular released on Wednesday, Scania has a premium quality brand with a nationwide market presence in trucks, buses, and generators.
On the other hand, Trentyre is the fifth largest tyre supplier in Zimbabwe by volume with a brand selection that embraces premium, value and budget tyre brands targeting customers at various price points.
“Zimplow’s existing corporate structure and business model supports the integration of these businesses and has a platform for synergies across the Group that will contribute to the overall success of the businesses and the Group,” reads part of the circular.
According to the finer details of the deal, Zimplow will acquire the targeted business through the issuance of 106 199 706 ordinary shares.
The current owners of the targeted businesses will now own 30,8 percent of Zimplow while current Zimplow shareholders will now own 69,2 percent of a much larger company than the current one, especially in terms of capacity to generate revenue.
In terms of size, the targeted businesses’ revenue for the 2019 financial year was approximately 35 percent of the $504 million Zimplow made during the same period.
The acquisitions will provide Zimplow with increased product diversity and market share in the transport and logistics industry.
While over the years, Zimplow has constructed a portfolio of complementary businesses and brands focused on manufacturing and distributing farming, the mining and construction industry implements the acquisition of Scanlink will see the enlarged company diversify into distributing large vehicles, long range buses, coaches and generators with the main customers being in the mining industry.
The acquisition of Tredcor Zimbabwe will see Zimplow venture into the distribution of Goodyear tyres and the retreading of a variety of brands.
According to the circular, these businesses are naturally complementary to the existing Zimplow portfolio and entrench the Company’s market position in the mining and construction industries.
The consolidation of Zimplow, Scanlink, Tredcor Zimbabwe and Birmingham Investments, as well as the addition of Stand 30001 Dagenham Road, Willowvale Township, Harare, is also expected to create a robust balance sheet through the addition of property assets.
According to the rationale of the deal, as the circular, a strengthened balance sheet will increase the company’s ability to attract capital and pursue growth opportunities organically and through strategic acquisitions.
In terms of the balance sheet, Zimplow will enlarge its capital base and attain the ability to leverage capital expenditure needed for business expansion.
It is believed the combined company will benefit from cost synergies through the centralisation of head office and administration costs.
“Cost synergies will be extracted from the removal of duplicative functions and the adoption of best practices across all the subsidiary businesses.
“The acquisition will eliminate the requirement for three independent corporate structures and remove cost duplication,” reads part of the circular. The Herald