Special Feature: Asset-light vs asset-heavy (Part two)

Companies have been forced to review their business structures, including shedding non-core assets.

Previously seen as a remedy for underperforming companies, asset-light strategies are now being used by companies to manoeuvre through the market changes caused by the Covid-19 pandemic and to create continued growth.

Read part one: SA companies driving asset-light strategies

In November last year, Omnia sold 90 percent of its share in petroleum company Umongo. This is part of Omnia’s turnaround strategy to focus its attention on the agricultural and mining sector and to dispose of assets that the business deems as being non-core.

This will not be the only asset that the company is considering. “Management is committed to the continued strategic execution, which includes the sale of assets identified as non-core,” says group FD Stephan Serfontein (pictured).

Umongo, which is part of Omnia’s chemicals division, supplies lubricant additives, base oils, process oils and chemicals, as well as technical solutions to lubricant blend manufacturers in sub-Saharan Africa.

“The sale of Umongo delivers an attractive cash receipt for Omnia, as we believe that there are limited synergistic benefits with our agriculture, mining and chemicals businesses,” Stephan explains, adding that the deal will further strengthen Omnia’s capital position, returning over R1 billion in cash.

He says the proceeds of the sale will either return cash to shareholders or be invested in strategic growth opportunities for the company.

Grindrod CEO Xolani Mbambo sold 9.6 percent of the company’s Shipping Holdings, the business from which it was born. The shares were sold at $13.50 (about R201) per share, raising gross proceeds of $24.87 million (about R372 million).The proceeds of the sale are going to be allocated to servicing debt and will increase its capital allocation.

“Grindrod’s focus,” says Xolani, “will be on ports, terminal and logistic solutions to service Africa’s imports and exports.”

Grindrod’s asset-light strategy has not stopped there: the company is in the process of selling the Marine Fuels business and its private equity assets.

You can read the full Special Feature in the first 2022 edition of the CFO Magazine