Zahid bids for South African equipment firm

• Target is fellow Caterpiller dealer
• Jeddah group already owns 19%
• Zahid may have to raise offer

Zahid Group, a Jeddah-based conglomerate involved in everything from mining to hospitality, is leading a proposed $1 billion-plus takeover of Barloworld, a listed South African construction equipment company. 

Gulf Falcon Holding, a Zahid Group subsidiary, and Entsha, a South African construction company that is linked to Barloworld’s CEO, Dominic Sewela, have made an offer of 120 rand ($6.79) per share for Barloworld, the Johannesburg-based company said in a statement. 

The offer is around 30 percent above Barloworld’s closing price on Tuesday, and values the company, which is the distributor for Caterpillar equipment in five African countries, at about 22.8 billion rand ($1.3 billion).

Zahid Group, which has been the primary Caterpillar distributor in Saudi Arabia since 1950, owns about 19 percent of Barloworld’s shares.

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It may have to raise its offer to gain complete control of the company, according to Silchester International Investors, an investment manager that represents clients who control almost 18 percent of Barloworld’s stock. Silchester said the offer would need to be at least 130 rand per share, 8 percent higher than the current bid.

“A full privatisation of Barloworld is unlikely to succeed without the support of Barloworld’s primary shareholders,” Silchester said in a statement on its website. 

“Silchester intends to exercise all rights available to shareholders in South Africa to protect the financial interests of its clients.”

Barloworld’s shares have surged nearly 20 percent in the past week in trading on the Johannesburg stock exchange.

It is the official Caterpillar dealer in South Africa, Zambia, the Democratic Republic of Congo, Malawi and Angola. 

Barloworld also has a consumer industries business that provides large companies with the ingredients for the manufacture of a range of products including food and beverages, paper, pharmaceuticals, building materials and adhesives.

Zahid Group has a diverse portfolio of companies operating in 14 different sectors, including construction, real estate, financial services and the oil and gas industry.