The potential R23 billion takeover of Barloworld by a consortium led by Saudi Arabia’s Zahid Group has moved a step closer to completion. A significant hurdle related to potential violations of U.S. trade laws has been addressed, providing a positive path forward for the deal.
The consortium, named Newco, consists of Gulf Falcon Holding, a subsidiary of the Zahid Group, and Entsha, a company with ties to Barloworld CEO Dominic Sewela. Their offer of R120 per share aims to acquire Barloworld, an industrial company that serves as the exclusive distributor of Caterpillar construction equipment in Southern Africa.
A major point of concern for the deal was a prior warning from Barloworld itself. The company had submitted a Voluntary Self-Disclosure (VSD) to the U.S. Commerce Department’s Bureau of Industry and Security (BIS) regarding apparent export control violations it was investigating. This raised the possibility that the deal might be stalled or jeopardized.
Barloworld has now concluded its investigation and submitted a final report to the BIS. The investigation found no violations of U.S. sanctions, which is a crucial win for the deal. However, it did identify apparent violations of U.S. export controls. Barloworld has stated it is taking these findings seriously and is actively addressing them.
A report from the law firm Dentons further supported this finding, concluding that the facts identified in the investigation do not constitute a violation of U.S. sanctions within the applicable statute of limitations. This positive outcome means that the “Standby Offer Condition” related to the VSD and the Dentons report has been fulfilled, marking a key milestone in the transaction.
The resolution of the U.S. trade issue adds to a series of other approvals the deal has already received. The transaction has secured unconditional approval from the Botswana Competition and Consumer Authority and South Africa’s Competition Tribunal.
However, there are still some key conditions that must be met:
- Competition Approvals: The deal still needs competition approval from COMESA in Angola and Namibia. The necessary filings have been submitted, and the group is working to expedite these approvals.
- No Material Adverse Change: No significant negative events can occur before all other conditions are met.
- No Superior Competing Offer: A better proposal for Barloworld cannot emerge and be completed.
If the remaining regulatory approvals are not secured by September 11, 2025, the “Longstop Date” will be automatically extended for three months.
The takeover has faced opposition from some shareholders, with two large shareholders voting against it at a general meeting. This opposition is partly fueled by concerns about a potential conflict of interest involving CEO Dominic Sewela, given his involvement in the consortium. The failure to secure majority shareholder support at the meeting is what initially triggered the “Standby Offer” process.
