South African arms manufacturer Denel expects to realise R500-million in the sale of its non-core assets, which forms part of the government’s policy to streamline parastatals and raise much-needed capital.
Denel’s non-core assets include shopping malls, office parks, an electrical products company, a soya processing plant, a plastic injection moulding company and IT companies.
Denel’s corporate communications manager, Sam Basch, said Denel could not provide individual values for non-core assets as these may become target prices for prospective buyers. Basch said Denel expects to realise about R500-million from the sale.
Absa senior treasury economist Chris Hart said some of the non-core assets being sold sound like things that Denel should never have been involved in in the first place.
“Almost any business passing from state to the private sector has more chance of thriving.”
Hart said the potential value-add would improve because decision making would be in the commercial realm. He added that interest in the assets will depend on demands the government may attach to the sale.
Basch said that in the 1990s Denel followed a strategy of commercial diversification and one result of this strategy was the investment in businesses with no link to Denel’s core business.
The companies for sale are:
Specialised Protein Products (SPP)
SPP is a soya processing plant that manufactures a human nutrition-grade soy fibre and soy-based protein. SPP uses a natural water process to extract the contents of the soybean.
Bonaero Park
The entire commercial property investment portfolio of Bonaero Park, which includes shopping malls, retail centres, office parks and industrial holdings, and a 130ha vacant piece of land that lies to the east of Johannesburg International airport, is to be sold. Basch said Bonaero Park used to be the housing utility company of the Armscor group. It later moved into the retail and commercial office sectors after diverting from housing.
Dendustri
Dendustri is a division of Denel that manufactures and maintains parts for aluminium smelters.
Voltco
Voltco is a business unit of Denel Optronics that manufactures consumer electrical products.
Observer Technologies
Observer Technologies manufactures electronic products and plastic injection-moulded components.
Irenco
Irenco’s business is plastic injection moulding and blow moulding.
Denel’s 22,98% shareholding in Arivia.kom
Arivia.kom was formed through the consolidation of the IT service units of parastatals Eskom (Eskom ITS), Transnet (Datavia) and Denel (Ariel Technologies) in January 2001. The consolidation created one of the largest IT companies in South Africa, with Eskom (45,06%) and Transnet (31,96%) as the other shareholders.
Denel’s 51% shareholding in CoSource
CoSource’s core business is the development of IT solutions and it owns the Q Muzik ERP software (business system software).
In March this year, Denel sold its 51% stake in IT company Sybase SA, which it had acquired in 1995, back to the company.
In October, Denel CEO Sean Liebenberg told the portfolio committee for public enterprises that the arms manufacturer had lost R1,6-billion in the financial year ended March 2005 and was expected to make a loss of R700-million in the current financial year.