Johannesburg, 22 January 2021 – Clotan Steel (Clotan), one of South Africa’s leading independent construction materials companies, successfully had its business rescue plan adopted, with the plan having been unanimously approved by its creditors.
As part of the approved plan, Precision Agri Africa (Precision) and Clotan entered into various agreements that will see Precision obtain a controlling stake in Clotan by providing post commencement finance, as well as international and local credit facilities that will adequately recapitalise the business and provide working capital. The transaction is subject to competition commission approval in South Africa which is expected to be a formality.
The Business Rescue Practitioners, Stefan Steyn and Tim Stokes of Business Rescue Partners, engaged with various interested parties to partner with Clotan and Precision Agri Africa (Precision) was the selected partner. The parties have negotiated a credit facility with Credit Guarantee Insurance Corporation of Africa Ltd (CGIC) for the supply of raw material from approved suppliers, subject to the fulfilment of certain conditions precedent. The recapitalisa-tion of the business will provide stability and enhance Clotan’s balance sheet. This will enable the company to grow its market share through organic and acquisitive growth. Following a decade of continued fragmentation in the South Africa steel industry, the parties believe that there is significant opportunity for consolidation, given the number of steel companies that are currently financially distressed.
Clotan’s existing business represents a good fit within Precision and although the two companies have no overlap in their respective product offerings, the businesses are complementary in many instances. Precision can play a strong role in the steel value chain, through demand for steel in infrastructure development in the agricultural and food supply chains. The growth in the African agricultural industry requires substantial investment in infrastructure where Clotan can supply the steel requirements in collaboration with Precision.
The acquisition by Precision will provide the possibility for synergies and economies of scale through Precision’s existing international agency relationships. This will ensure that Clotan has access to the best quality products, at best prices and terms, from a diverse international supplier base. Clotan will also enjoy the benefit of marketing and sales support of Precision’s existing operations in selected African countries. This will also allow Clotan to expand its current product range and grow into new African territories by leveraging Precision’s existing Africa footprint.
Clotan is a South African family-owned business founded in 1983 and is a major player in the building, construction and steel industry in South Africa. Clotan supplies a broad scope of products in the cold formed section, roofing and cladding sub-segment of the fabricated structural steel segment in the Iron, Steel & Engineering Industry. Its primary market is the construction industry and more specifically in the industrial and commercial real estate sectors. Clotan will continue to operate independently from
Precision and the existing shareholder and management team will remain active in the business.
Precision supplies a diverse, but com-plimentary range of products, services and solutions to the agricultural sector across Sub-Saharan Africa. The group has interests in primary agriculture, large scale agricultural development projects and supplies agricultural inputs and crop input finance.
Precision operates from Potchefstroom with various additional points of presence in Africa and currently operates in South Africa, Rwanda, Zambia, eSwatini and Namibia. Opportunities are being explored in the near future in Mozambique, Uganda and Angola.
Precision has concluded various multi-year contracts in Rwanda and Uganda in the agricultural sector to requiring significant
volumes of quality roofing and related products which Clotan manufactures and has experience to supply into the African market.
Bertus Brink, Chairman of Precision Agri Africa said, “This transaction creates an opportunity for Precision to execute its growth strategy in the African agriculture and sub-sectors through its investment in Clotan to supply various products to satisfy the infrastructure expansion requirements in these markets. We believe it is a win-win outcome for all stakeholders through the innovative structure of the adopted business rescue plan. We are very excited about the prospects of the new partnership with the