Remgro confirms Dorbyl stake sale

RAC involvement ‘in best interests of shareholders’

REMGROHAS confirmed that it had sold most of its stake in Dorbyl to RE:CM and Calibre (RAC) and said yesterday that it believed it was in “the best interests of Dorbyl and the remaining shareholders to seek the involvement of RAC”.

A statement issued by Remgro said that RAC’S “skills and knowledge of the foundry industry will complement the current management team and assist in completing the road to recovery”. It noted that the stake had been sold for a “nominal amount”.

Remgro’s exposure to Dorbyl, which has been dogged by controversy for much of the past 10 years, came to an abrupt end last Friday when a JSE announcement revealed that it had unexpectedly disposed of its controlling stake in the firm.

The former engineering group sold the bulk of its assets over the past 10 years, leaving it with just one operating asset, Guestro Castings.

During the prolonged process of disposal a number of its senior executives faced accusations of conflicts of interest. Last February the high court ruled in favour of Dorbyl’s claim of R41.7 million against one of its former directors.

Late last Friday, Dorbyl released a JSE notice referring to the sale of a 34.9 percent stake in the company by Metkor, which is a wholly owned subsidiary of Remgro.

The shares were sold to two entities. The Reef Group has acquired a 20.1 percent stake and RAC have jointly acquired 14.8 percent. Remgro, through Metkor, is holding onto a 6.5 percent stake in Dorbyl.

Although Remgro has disposed of effective control of Dorbyl, the way in which the deal was structured means that the buyers do not have to make an offer to minority shareholders. The 34.9 percent sold by Remgro is just below the 35 percent that would trigger a change of control. This means that the company has moved from a control situation to a nocontrol situation.

The sale by Remgro comes just weeks after a Dorbyl minority shareholder called for an investigation and analysis of the company by an outside firm of accountants and referred to a dramatic decline in Dorbyl’s cash from R81m at the end of March 2011 to less than R44m at the end of September.

This reduced its net asset value to R2.33 a share from R3.15 apiece. Details of the letter were published by the Financial Mail early in February.

Remgro shares rose 1 percent yesterday to close at R133.12. Dorbyl fell 12.3 percent to R1.36.