Afrox is the latest target of a foreign takeover. Photo: Afrox
  • Foreign investors have been dumping billions in South African bonds and shares for months.
  • But there has been some recent interest in buying individual companies. 
  • Some locally-focused companies are looking dirt cheap, experts say.
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Foreigners have been dumping South African shares and government bonds without respite for many months now - so far in 2020, they have been net sellers of R77 billion in bonds and almost R113 billion in shares.

But it doesn’t tell the whole story: some overseas companies are showing interest in acquiring local companies, many of which are looking dirt cheap. 

The latest target is Afrox, the industrial gas and welding company founded in 1927. Its main shareholder, the German multinational Linde, announced last week that it wants to buy out all minority shareholders and delist Afrox from the JSE after 57 years. Linde clearly believes the company is vastly undervalued - its offer was an effective 58% above the share price,  which has been languishing at multi-year lows for some time.

Afrox share price. Source: Google

It’s not the only company that may look like a bargain for buyers with deep pockets. “Many South African companies are cheap, as valuations are depressed,” says Schalk Louw, portfolio manager and strategist at PSG Wealth Old Oak.

More potential bidders are bound to be interested in companies that are focused on the local market, which are trading at very low valuations, says Wayne McCurrie of FNB Wealth and Investments. Earlier this year, Pepsico bought Pioneer Foods in a R26 billion deal, while an Israeli conglomerate acquired dairy company Clover last year.

There have also been some other interesting developments of late:


Earlier this month, the French media company Groupe Canal+ announced that it had bought a stake of 6.5% in Multichoice. Canal+ is owned by Vivendi, which is also the owner of one of the biggest record labels in the world, Universal Music Group, as well as the advertising giant Havas.

Multichoice will give Canal+ a strong footprint into Africa, says Louw. But while the French company may just be testing the waters with a relatively small stake, there would still be considerable hurdles to clear for a takeover. One of which is that local legislation will have to be changed to allow foreign control of local broadcasters, says Jean Pierre Verster, portfolio manager at Protea Capital Management.


The Saudi company Zahid Tractor and Heavy Machinery has been building its stake in the local industrial group Barloworld, and it now owns a hefty 15%. 

Zahid Tractor is part of the Zahid Group, which is a privately held industrial conglomerate, providing services to construction, mining, oil and gas, agricultural, power generation, material handling, and transport industries.

Barloworld would be a good fit: it is also involved in transport and supply, and - like Zahid Tractor -  distributes Caterpillar equipment.


The local documents storage company received a takeover offer by an American private equity group, Housatonic Consortium. Given the pandemic, the takeover has been delayed. Verster believes it will be finalised next year.

Other potential targets

There are a couple of other particularly smaller companies which, at least at on the face of it, look like good acquisition targets due to their attractive valuations, says Gryphon research analyst and portfolio manager Casparus Treurnicht. These could include Nampak, Astral, Consolidated Infrastructure Group, Mondi and PPC.

“Distell is a sitting duck,” believes Louw. The company has lost 45% of its value over the past year, as two alcohol bans during South Africa’s lockdown hit its sales and investor sentiment about the company. But this week, the company said that its sales and cash generation are “ahead of expectations”. Louw believes Distell is vastly undervalued by the market, and that the lockdown damage is overestimated.

If an external buyer doesn’t make a move, Remgro itself, which owns almost a third of Distell, may soon buy out minorities, expects Louw.

The industrial company Hudaco, which focuses on automotive and electrical products, also offers a compelling opportunity, he believes. The company generated more than R850 million in cash in the past financial year (pre-Covid), but has lost 30% of its value this year. 

If foreign bids don't emerge, McCurrie expects local acquisitions.

“There may also be some consolidation within SA as companies have relatively strong balance sheets and will be very reluctant to expand overseas given the history,” says McCurrie. 

Woolworths, Sasol, Truworths, Famous Brands and other companies have destroyed billions in value after disastrous overseas acquisitions.

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