BUSINESS REPORTER
Zimplow Holdings Limited will seize control of Barzem after acquiring the stake held by Barloworld as it seeks to use that infrastructure to pivot its business.
Zimplow CEO Vimbayi Nyakudya said the group is acquiring the stake at a 20% discount, adding that negotiations are underway for the pricing.
Barzem has ceased operations after losing the caterpillar distributorship.
“Having access to Barzem infrastructure 100% it means we can now position or pivot that portfolio to be able to take advantage of it from our other business. We have used that property solely for caterpillar business. We can now utilise that infrastructure for other businesses, which are within the group. We can be able to provide mechanisms to ensure that each OEM [original equipment manufacturer] brand but at the same time sweat the value that is in that portfolio,” Nyakudya said.
He said having infrastructure “like that can position yourself in the recruitment and selection of the right OEM”.
“Concluding that transaction alone will give us the much-needed lift to conclude on that acquisition of an OEM. It is critical that we conclude the acquisition of the Barloworld shares. Not only will that give us that lift, we are also getting it after cleaning the balance sheet,” Nyakudya said.
He said the group would acquire the stake with internal resources after skipping payment of dividend.
“Our balance sheet is strong. In real terms from continuing operations we made a profit last year. You will notice that the board did not declare a dividend. We have a commitment in terms of our internal policies to declare a dividend when we make money. In this particular case the money that was supposed to go to shareholders as dividend will go to the shareholder as an acquisition,” the executive said.
He said the group already has the firepower to be able to fund the acquisition of Barzem.
“If you look at the third pillar, which is the property portfolio that will be able to acquire through Barzem, we can utilise that on a mortgage basis to raise more funds,” Nyakudya said, adding the group has US$30m in terms of property value and “if we are to release, it is more than enough money we need”.
Zimplow has low gearing of 3.9% which gives it room to borrow or utilise bank borrowings if need be.
“We are not in a weak position internally. Over and above that, we always look after our shareholders if need be. We are a business that, going forward, continues to provide value to our shareholders. When it’s a rainy day when the banks are not forthcoming, we may need to seek that umbrella from our shareholders.”
Zimplow’s business model is anchored on three pillars—distributorship, manufacturing capacity (steel fabrication and retreading factories) and the property segment.
The distributorship segment and manufacturing contributes 80% and 20% respectively to the group’s top line.
The segment has US$30m in value, which is 30% of Zimplow’s balance sheet.
Due to competitiveness, Zimplow still needs to rely on internationally acclaimed premium brands to provide customers with the very best of service, Nyakudya said.
He said the group wants to expand the manufacturing business, extend capacity and grow the export base. This has seen the group investing in the manufacturing business.
The group has added three engineers in the factory operations to ensure that it develops the products at the “right cost with the right value proposition with the right capability to ensure that the group extends itself in terms of product development”.
“We are confident that that initiative alone will continue to bear fruit. In the past year, the export business grew by 35%. Despite the challenges that we have been facing on the local side, our export business managed to sustain us in that period in terms of foreign currency generation,” Nyakudya said.
