Kutana: the deal to buy a 51% stake in Grinaker-LTA fell through because of uncertainty about the unit's performance
Following the recent announcement by Aveng Ltd that the agreement to sell a 51-percent interest in its Grinaker-LTA unit to Kutana Construction had been terminated, Kutana has clarified that the difficulties encountered in closing the deal relate to under-performance by Grinaker-LTA, rather than its own ability to fund the transaction. Kutana says the ongoing strategic review announced by Aveng on 26 September 2017 has raised significant concerns, given the uncertainties this review potentially poses regarding Aveng’s commitment to Grinaker-LTA.
Thoko Mokgosi-Mwantembe (pictured), CEO and founding member of Kutana, said:
“While Kutana is in a position to meet its financial commitment in terms of the purchase agreement, which in fact was demonstrated to Aveng, the significant deterioration in Grinaker-LTA’s financial performance since signing the deal, and the uncertainties surrounding Aveng’s ongoing strategic review are a great concern to myself, our investment committee and our board. To ensure our investment and financial contribution would yield the projected return and desired impact, we raised these crucial and fundamental concerns with Aveng and began to engage on how best to find a workable solution in the interests of both parties. Despite these discussions being on-going, Aveng has chosen to abandon the transaction based upon a technicality.”
Kutana says the upfront payment was raised and demonstrated as such to Aveng. However, the unconditional release of such funds in light of the material changes affecting the business unit and its parent could not have been undertaken without Kutana having secured greater certainty from Aveng regarding these material changes, the construction firm says, and the impact thereon on the long-term sustainability of the overall transaction. This certainty is especially relevant to Kutana given the significant commitments made in terms of the Settlement Agreement reached with the SA Government.
