The year is 1902… The place? Durban South Africa.
An English solider named Major Ernest (Billy) Barlow borrowed £1,000 to expand his family’s UK business.
The company, named Thomas Barlow & Sons, began operating out of two small, rented rooms.
Over the next two decades, they sold woollen goods, blankets, coats and engineering supplies.
By the late 1920s, the company scored a major deal.
Caterpillar (the world’s largest construction-equipment manufacturer) appoints Thomas Barlow & Sons as Caterpillar’s dealers for Natal.
Then, over the next 50 years, the company rapidly expanded into motor retail; steel and building materials; handling equipment; consumer electronics and steel manufacturing.
With interests in everything from food to mining, it became a dominant player in many sectors of the South African economy.
The company eventually listed on the JSE in 1941 as Barloworld (JSE: BAW).
By the 90s, the company boasted an employee count of 240,000 people, and 79th position on the Fortune 500 list of global companies.
Over the next three decades, the company…
• Unbundled non-core businesses and changed its name to Barloworld.
• Diversified across Europe.
• Acquired SA car rental company Avis, Equipment Mongolia and Tongaat Hullett Starch (Ingrain) to add new product ranges in areas where they already operated in.
Barloworld was also further granted Caterpillar dealership franchises in Zambia, Malawi, Mozambique and Angola, giving it coverage of the whole Southern Africa region.
Today, the company generates over R41 billion in revenue and over R3.8 billion in operating profit.
To say Barloworld is a SA (and global) stalwart is no understatement…
So, it’s no wonder why international investors have eyed the company out for a takeover!
On 11 December, a unit of Saudi Arabia’s Zahid Group and its local partners offered to buy all shares in Barloworld for R120 per share. As a result, Barloworld shares soared nearly 20%.
At a price of around R108 today, Barloworld’s shares still trade at around a +11% discount to the offer price. So, you could still get in today for a small profit.
The question is, why the buyout?
Well, Middle Eastern firms have increasingly sought investments in Africa to diversify and compete with Chinese and European companies.
Like Barloworld, the Zahid Group is also a distributor of heavy equipment machinery, so it makes sense to combine businesses to take on competitors.
This isn’t the first time Middle Eastern companies have eyed African assets…
ACWA Power, a Riyadh-based company, signed a memorandum of understanding to invest $10 billion in South Africa’s renewable-energy industry over the next decade.
Earlier this month, the Kingdom of Saudi Arabia’s announced it will invest around R9.5 billion to help build a platinum group metals (PGM) smelter and base metals refinery (BMR) in the Waterberg region in Limpopo.
These investments are designed to meet Saudi Arabia’s “Vision 2030 initiative to develop the mining and minerals industry to become the third pillar of the Kingdom’s gross domestic product.”
And don’t forget in 2022, Dubai-based logistics company DP World, acquired SA-listed logistic company Imperial. Today, DP World operates nine ports on the African continent.
Who could be the next target for Middle Eastern companies?
Well, last month, a Bloomberg report revealed that UAE-based International Resources Holding (IRH) wants to expand its growing portfolio of mining interests.
The report hinted that IRH is keen to buy an indirect stake in Toronto- and Johannesburg-listed tin miner Alphamin (JSE: APH).
Tin is a crucial metal used in solder for electronics and in renewable energy technologies.
Alphamin operates the Bisie tin mine in Congo. The mine is currently undergoing expansion to about 20,000 tons a year of tin – which is roughly 6% to 7% of world production.
While the deal is not set in stone, it wouldn’t surprise me to see the tin miner attract international investment. A move that could send its shares soaring!
It also wouldn’t surprise me to see more Middle Eastern companies target SA-listed stocks – particularly small caps – for diversification and expansion. And that means profit-opportunities for us, investors! If you’re not yet part of our small cap community, Red Hot Penny Shares, then I urge you to join us here for the best profit opportunities in this space in 2025!
