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DealMakers - 2021 Annual

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Business Rescue Transaction of the Year

Group Five

Like other major construction companies, Group Five was experiencing cash flow difficulties prior to being placed in business rescue, which were unrelated to the impact of COVID-19.  The dearth of infrastructure spend since the 2010 FIFA World Cup – particularly from state-owned enterprises which, in the past, had been a consistent and reliable provider of work over an extended period of time – forced construction companies to look elsewhere.

The business rescue was large and complex, and returning the entire group to solvency was not feasible, given the depth of financial distress. Several subsidiary businesses required restructuring prior to disposal. The following companies were sold:

  • The Intertoll Europe Business was a multi-jurisdictional sale complicated by the inability of Group Five to provide any material sale warranties. Notwithstanding this, excellent value was realised with the sale for €109m (R2,1bn) in September 2020.

  • The Intertoll Africa business was sold to a BEE consortium for a minimal amount, but saved c.950 jobs.

  • Group Five Projects had over 60 permanent and hundreds of contract labour jobs which were saved through composite sale transactions.

  • Barnes Reinforcing Industries, a joint venture, was sold to Barnes Group, saving c.120 permanent jobs.

  • The Everite sale to Lonsa and Legacy Africa (nominated for Private Equity Deal of the Year 2021) saved 500 jobs in a transaction valued at c.R600m.

Local Advisers

Financial Advisers: Metis Strategic Advisors, Birkett Stewart McHendrie

Legal Advisers: Werksmans, Cox Yeats, Allen & Overy, Webber Wentzel, Tiefenthaler, ENSafrica, Hogan Lovells, Van Wijk, Norton Rose Fulbright and Fasken

In Group Five’s case, it entered business rescue in March 2019 (Group Five Limited and its major subsidiary, Group Five Construction) amid severe pressure from the termination of the Kpone power project in Ghana, which resulted in its bank guarantee providers making a $106,5m payment for which the group was liable. With alternative methods of financing exhausted because the banks turned down requests for funding, the only remaining option was that of selling its assets.


Before its financial collapse, the JSE-listed group consisted of 179 companies across 38 countries, employing 6,000 people, boasting a market value of c.R7bn. In June 2020, after 46 years, the company which traced its roots back to 1878, delisted from the JSE.

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A small minority of assets/business disposal processes remain to be completed; the majority of employees engaged by the group at the commencement of the proceedings have retained their jobs, with c.66% having been transferred along with the sale of the businesses.


The appointment of an independent Creditor Committee Chair was a first for the business rescue process in South Africa, and although not a legal requirement, was in the best interests of creditors, providing an independent analysis. Secured and concurrent creditors have been paid out significantly more than would have been the case in a liquidation scenario, and preferred creditors have been paid out their full entitlements. The post-commencement finance providers, a critical element in the success of the business rescue process, have been repaid.


The adoption of an integrated approach to the Implementations Plan has resulted in substantial returns in excess of liquidation being achieved and, in most cases, sustainable value creation was realised. 

Comment from the Independent Panel:  

The panel had long discussions regarding the finalists, but complete consensus on our winner. The Group Five business rescue could be a case study on how business rescue should be done. Significant value protection for all stakeholders and thousands of jobs saved made this an easy deal to select. Once again, a quality submission assisted the panel to evaluate what was clearly a complicated and drawn out process.

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BR Pick of the best in alphabetical order

Afarak Mogale

In 2009, the NASDAQ OMX Helsinki Stock Exchange and the London Stock Exchange listed Afarak Group (previously named Ruukki Group) bought a 90% stake in Krugersdorp-based Mogale, acquiring the remaining 10% stake in 2017. Mogale comprises four furnaces capable of producing up to 550,000t/y of ferrochrome and are licensed to produce four key products: silico-manganese, plasma ferrochrome, charge ferrochrome and stainless steel alloy.  

In 2019, the irregular availability and the high cost of energy caused major difficulty for Mogale in achieving good, reliable performance in the smelter. In addition, macro business influences – notably the falling ferrochrome prices, influenced by US/China trade uncertainties – compounded site and country-specific challenges. In May 2020, financially distressed and with cash flow shortages, the board placed the company into business rescue. 

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All operations were placed into care and maintenance in late July 2020, owing to external logistical challenges, further cash shortages and the impact of the COVID-19 pandemic on the workforce. All employees were offered voluntary severance packages with a recall period of six months. In September of that year, a business rescue plan was adopted by creditors, outlining three possible restructuring options for the company. These included a restructuring of the existing shareholding, a sale of the shares and/or assets of Mogale, or a restructured repayment process to creditors. 

Notably, options one and three were an unlikely outcome, given the severe constraint of cash and the termination of further post-commencement funding. Following consultation with major creditors, the business rescue practitioners began the process of finding an interested external party to either lease or acquire the assets of the company, to maximise the ultimate value for the creditors.

The sale of Mogale to ferrochrome producer, Bright Minerals in July 2021, for a transaction value of R300 million, marked the exit of the company from business rescue. The avoidance of a forced sale was a pleasing result as, according to an independent assessment, it may only have recovered some R94 million. Bright Alloys (as it has been renamed) has recently brought the furnaces back into operation with the re-employment of employees.  

Local Advisers

Financial Advisers: BDO Business Restructuring and Absa

Legal Advisers: Werksmans and Webber Wentzel

Consolidated Steel Industries

The shutdown of the construction and steel fabrication industries, as a result of a slowing South African economy and the COVID-19 pandemic, created liquidity issues for Consolidated Steel Industries (CSI), a leading independent construction materials conglomerate. The business comprised the established brands, Global Roofing Solutions (GRS), a leading South African roofing material manufacturer and Stalcor, a top three local distributor of stainless steel and aluminium products.


In July 2020, the company’s management and board took the decision to enter business rescue. Prior to entering business rescue, the company was wholly owned by Tiso Blackstar. In May 2020, Tiso had entered into an agreement with Afmetco, the holding company of Eurosteel, a South African company supplying high quality stainless steel and aluminium products. Whilst the sale of claims was unconditional, the sale of shares was subject to several conditions precedent, the key of which was Competition Commission approval, without which the transaction would not be fully implemented. As a result, the deal was not finalised at the commencement of the business rescue process.

Comment from the Independent Panel:  

This transaction delivered on its objectives through the process of business rescue. Enhanced financial benefits for stakeholders and significant job preservation.

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The business rescue plan was adopted in September, having been approved by more than 98% of creditors present and voting. The plan included a combination of strategies to ensure the best return to all creditors, while protecting jobs. This included: operational efficiencies and cash flow initiatives which returned the company to a cash positive position after three weeks of business rescue; the sale of GRS as a going concern; the sale of Stalcor stock; and the subsequent winding down of the remaining businesses.

The speedy implementation of the business rescue plan ensured that there was a meaningful business, in the form of GRS, to present for sale to Rockwood Private Equity. The business, which has traded independently, has taken over the risks and responsibilities of its predecessor, showing profitability for four months before the sale was concluded, avoiding mass retrenchments and preserving over 380 jobs out of 769, a situation not possible in a liquidation scenario.

Local Advisers

Financial Advisers: Engaged Business Turnaround, Deloitte Corporate Finance and Absa

Fairmont Zimbali Resort

The luxury five-star hotel situated on the Ballito coastline, owned by Kuwait-based IFA Hotels and Resorts, was forced into administration in September 2020, after the COVID-19 pandemic severely curtailed the hospitality and tourism sector. 

In 2003, IFA Hotels and Resorts acquired a 50% stake in the Zimbali Resort from Tongaat Hulett’s property development arm for R65m. The companies invested a further $600 million in the resort, which opened ahead of the 2010 FIFA World Cup.

Comment from the Independent Panel:  

Excellent collaboration between creditors owed over R1bn meant that the approved business rescue plan was completed within 25 days, with jobs being saved and the business restructured for a sustainable future.

Initially, several large offers were made for the resort. However, as time progressed and the process unfolded, further impacted upon by the second COVID-19 wave, The Capital Hotels & Apartments Group (Capital Hotels), founded by hospitality industry entrepreneur Marc Wachsberger, stood out as the preferred bidder. The most pressing issue faced in the process was the securing of funding for the acquisition.

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In March 2021, Capital Hotels reached an agreement to acquire the property through a combination of a sale of shares and a subscription for shares transaction, in a deal that balanced the interests of all stakeholders. In terms of the R240m deal concluded, 140 employees retained their contracts of employment. Capital Hotels has further committed to investing c.R30m in upgrading the Fairmont Zimbali Hotel as part of the deal which will see the hotel brought back to its 5-star status, and the incorporation of flexible apartment style accommodation. 

Local Advisers

Financial Advisers: Berrangé and Jones Lang LaSalle

Legal Advisers: Werksmans 

Comment from the Independent Panel:  

All the members of the panel agreed that this was a good transaction with a favourable outcome for stakeholders, but it is hard to fully evaluate it without more financial information.

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