Construction group Aveng announced last week that it had concluded a binding agreement to sell a 51% beneficial interest and an initial 45% economic interest in Aveng Grinaker-LTA to Kutana Construction for a maximum of R756-million.

Kutana Construction is a black-women-owned and -led business owned by the Kutana group.

The intention is for the deal, which still needs to meet certain conditions precedent, to be effective by February 1, 2017, and for the purchase to be settled in full by 2020.

The transaction has been structured on commercial terms and the purchase price, which is capped at R756-million, will be determined based on the financial performance of Aveng Grinaker-LTA over the 2018, 2019 and 2020 financial years.

Kutana Construction and Aveng will be locked into the terms of the transaction for a minimum period of five years.

Aveng CEO Kobus Verster signalled the group’s intention to pursue a “transformational” transaction at the JSE-listed group’s interim results in February and indicated in August that the deal would be concluded soon in light of the stabilisation of Aveng Grinaker-LTA, which

reported a 21% fall in revenue to R7.3-billion in the year to June 30, but a far smaller operating loss of R69-million, compared with the R575-million loss of 2015. Verster even expressed optimism that the company could return to profitability during the 2017 financial year.

argued that the introduction of an empowerment partner would ensure that Aveng Grinaker-LTA remained “relevant in a transforming construction sector” and would position the unit for future growth in South Africa and the rest of Africa.

The transaction would also give effect to the transformation obligations contained in the October 2016 settlement agreement reached with government, following findings of widespread anticompetitive conduct in the industry.

Kutana was identified by Aveng with the assistance of independent deal advisers and selected owing to its record in growing businesses, as well as its access to funding and an alignment with the vision and values of Aveng.

The two parties also intend using Kutana Construction as an investment vehicle for the introduction of Construction Industry Development Board-certified emerging contractors to buy a 25% equity stake in Kutana Construction.

“Our acquisition of a substantial shareholding in Aveng Grinaker-LTA forms part of our strategy to empower and provide opportunities for emerging black contractors in the market, as well as to develop and attract black professional and management skills in the construction sector,” Kutana CEO Thoko Mokgosi-Mwantembe explains.

Negotiations with prospective emerging contractors are said to be under way.

The Aveng Grinaker-LTA transaction follows a separate August 10 agreement between Aveng and a subsidiary of Kutana to acquire Steeledale as part of a phased exit by Aveng of the steel reinforcing and mesh business.