Embargo – 17 March 2014 – Johannesburg
Trinitas Private Equity has acquired a 70% stake in the Auto Industrial Group, one of South Africa’s leading automotive component manufacturers. The remaining 30% of the business - previously wholly owned by German-based global automotive component manufacturer, ZF - now sits in the hands of a management equity pool.
Auto Industrial, which has a significant local market share for its product range, is an integrated provider of machining and assembly, ductile and grey iron castings and hot steel forgings of various automotive components (brake discs and drums, steering knuckles, wheel carriers, flywheels, wheel hubs, pinions).
Soteris Theorides, one of the founding partners of Trinitas, described the acquisition as being right in the Fund’s sweet spot. "This transaction gives us a majority stake, alongside a highly regarded management team of experienced and committed individuals, who have built Auto Industrial into a R650 million turnover business. This is exactly the sort of investment we like to make: management as operational partners having a significant equity stake, buying into a strong cash generative company with a diversified product range and customer base, a long track record and excellent growth prospects."
Theorides said that Trinitas is excited about bringing Auto Industrial into its portfolio, as the manufacturing sector remains an important part of the local economy. "The 600,000 vehicles manufactured annually in South Africa may represent only about 1% of global production, but locally it counts for approximately 7% of our GDP, 30% of manufacturing jobs and 10 – 15% of exports."
He commented that the recent rand depreciation was a long-term positive for Auto Industrial that would support organic volumes under current contract and open-up opportunities for new work and the potential for export. In addition, the fund manager feels that government’s Automotive Production and Development Programme (APDP) that replaced the Motor Industry Development Programme (MIDP) in January last year, encourages local component production, represents long term commitment to, and good growth prospects for the automotive manufacturing sector.
Existing CEO Andrea Moz, who has been in the business for 20 years, will remain in his position and become a significant shareholder. "This company was started in 1969 by Dean Fragale and has been backed by ZF for the last 14 years. We’re now happy to welcome Trinitas to the team and look forward to continued growth with them." The company employs 800 people and has a remarkably low staff turnover. No jobs will be lost in the change of ownership.
Yousuf Sujee, Trinitas Deal Executive, explained that this was a non-core business activity for ZF. "They are a leading global manufacturer and supplier of transmission and steering systems as well as chassis components and complete axle systems, for all major automotive manufacturers worldwide. We are thrilled to have been able to acquire this asset considered to be non-core to ZF as its product lines are different to what it manufactures everywhere else in the world." ZF retains its presence in South Africa through ZF Lemforder, an assembler of chassis systems. The acquisition is further to a trend observed by Trinitas for foreign-owned assets to become locally available for new ownership as multinationals find themselves needing to free up cash for their own local investment.
This is Trinitas’ fifth deal and takes the Fund to almost 60% deployed. "We’re right on track momentum-wise and we expect to be raising further funds in the short-term," said Theorides.
