JSE-listed Distribution and Warehousing Network’s (Dawn’s) share price rose by 21% on Thursday morning after the company confirmed that it would sell its 49% interest in Grohe Dawn Watertech (GDW) to Lixil Corporation, which owns the other 51% of GDW.
The sale follows the announcement in July that Dawn had signed a nonbinding memorandum of understanding with Japan-based Lixil for the potential disposal of Dawn’s shareholding in GDW.
Dawn’s noncontrolling interest in GDW is considered to be noncore to the group.
“This transaction is the best course of action for Dawn and allows us to become debt-free. As committed in the publication of our final results for the year to March 31, Dawn management has been actively addressing the group’s short-term challenges, implementing actions which include corporate restructuring activities and alternative funding options. This transaction represents a key step in the process and allows us to focus on the implementation of our turnaround plan to restore the business to profitability," says Dawn CEO Edwin Hewitt.
As part of the transaction, GDW will repay Dawn’s shareholder loan claim against GDW, pursuant to which Dawn will receive an aggregate consideration of R324.5-million.
Dawn plans to use the transaction proceeds for its core South African operations after settling a R200-million revolving credit and overdraft facility with Absa bank, as well as all transaction costs.
Dawn will remain a long-term master distributor for the GDW product range in South Africa, Botswana, Swaziland, Namibia, Lesotho, Zambia, Zimbabwe, Mozambique, Malawi, Seychelles, Rwanda, Ghana, Tanzania and the Democratic Republic of Congo.
GDW CEO Henk Seulmann described the transaction as an exciting step forward for the company.
"We are set to evolve to become a key part of the global Lixil footprint via an integration process that will feature investment, as well as strong support from Japan and other parts of the network. This will allow us to deliver high-quality service and world class products to our customers. We want to see everyone in Africa experience one of our brands, and we believe that as part of Lixil, this now becomes a real possibility," he commented.
Lixil CEO Kinya Seto said full ownership of GDW would strategically position the company for growth in South Africa and the emerging markets of sub-Saharan Africa.