Ailing defence parastatal Denel faces major restructuring under its new CEO, Shaun Liebenberg, including the possible sale of strategic equity stakes in some of its key businesses.
Swedish firm Saab, which manufactures the South African Airforce’s new Gripen jets, is interested in acquiring a strategic equity stake in Denel’s aerospace division; European Aeronautics and Defence Systems (EADS), the Franco-German conglomerate, is considering a role in the Denel Land Systems division; and EADS subsidiary Eurocopter may buy into the Rooivalk attack helicopter project.
These moves, according to people familiar with their broad outline, are part of a rescue plan that Liebenberg will put to the Denel board at its June 30 meeting.
In addition to bringing in foreign investors that can shore up its balance sheet, and improve access to international markets, the debt-crippled company is considering decentralising its structures. Liebenberg is already handing power back to divisional executives who had been brought to heel when his predecessor, Victor Moche, tightened management controls in the face of a mounting financial crisis. Asked about the possible deals, Liebenberg told the Mail & Guardian there was nothing conclusive about any of his discussions with other defence companies.
“I talk to Saab, EADS, Eurocopter and General Dynamics every day, but that doesn’t mean we have a deal,” he said. “I will put my plans to the board on June 30, and if it approves them they will go to the minister of public enterprises.”
Denel lost R384-million last year on revenues of R4,4-billion.
In the months leading up to his removal Moche had been warning the government that the company would not be able to continue trading after the end of June if its cash crunch was not addressed.
Liebenberg says, however, that Denel will be open for business on July 1, and beyond. “Even if we found a strategic equity partner tomorrow, it would take months before we saw any cash,” he told the M&G.
“I have found short-term solutions to that problem, and we are going ahead aggressively with planning a successful future for Denel.”
A strategic equity partner has long been seen as the solution to Denel’s -difficulties. In 2003, however, the government pulled out of a deal with BAe systems to buy 30% of Denel’s aerospace and ordnance divisions over concerns about the amount of control they were being asked to cede.
A smaller transaction with Turbo-meca, which acquired 51% of the aircraft engine subsidiary Denel Airmotiv, went ahead.
A spokesperson for Saab South Africa declined to comment.
Local representatives of EADS and Eurocopter were unable to return calls by the time the M&G went to press.