Sephaku Holdings Limited (JSE: SEP), through its subsidiary Metier Mixed Concrete, has purchased a key property in Phoenix Industrial Park, KwaZulu Natal. The acquisition is set to strengthen Metier’s operations in the region.
Acquisition Details
Sephaku Holdings Limited (“SepHold”) announced that its subsidiary, Metier Mixed Concrete Proprietary Limited (“Metier”), finalized an agreement on April 5, 2024. Metier will acquire a property located at 39 Vulcan Place, Phoenix Industrial Park, Phoenix, KwaZulu Natal. The seller, Teamway Trading 1 CC, agreed to a cash consideration of R21 million for the property.
Metier has been leasing a 4,000m² portion of this property for 17 years. The lease is set to expire on March 31, 2025. The lessor intended to sell the property rather than renew the lease. Metier’s plant on this property, established in 2007, is its busiest and serves the area from Durban central to Umhlanga Rocks.
Rationale for Acquisition
The board of directors of SepHold believes purchasing the Phoenix Property is cost-effective. Refurbishing the Phoenix Plant on the newly acquired property will be more economical than relocating and establishing a new plant after the lease expires. Additionally, finding a suitable rental property in the area poses a challenge.
Acquiring the property also offers an opportunity to rent out 6,000m² of excess space to third parties, which Metier does not currently need.
Effective Date and Conditions Precedent
The acquisition will be effective from the Date of Transfer. The transfer is subject to the following conditions:
- Metier pays all costs related to the transfer within seven days of notification from the conveyancers.
- The seller cancels any mortgage bond registered against the property at the Date of Transfer.
- The conveyancers lodge either a Transfer Duty Receipt or Transfer Duty Exemption Certificate with SARS, and SARS issues the respective document.
Financial Information
The Phoenix Property’s net asset value is R21 million, based on the board’s and the bank’s valuations. The board members are not registered property valuers.
Post-transfer, Metier will save on its rental expense, which was R1.3 million per annum for the year ended March 31, 2024. From the Transfer Date, Metier will incur an annual amortizing bond payment of R3.7 million at an interest rate equal to the Prime Rate less 0.75%.
| Financial Information | Details |
|---|---|
| Acquisition Consideration | R21 million |
| Existing Rental Expense | R1.3 million per annum |
| Annual Bond Payment | R3.7 million per annum |
| Interest Rate | Prime Rate less 0.75% |
| Excess Space for Rent | 6,000m² |
The financial information has not been reviewed by a reporting accountant as per Section 8 of the JSE Listings Requirements. The directors of SepHold are responsible for this information
Conclusion
The acquisition of the Phoenix Property is a strategic move by SepHold. It ensures continued operations at Metier’s busiest plant while offering potential rental income from excess space. The transaction reflects SepHold’s commitment to cost-effective and strategic growth in the South African cement and construction materials sector.
