In March 2023, Bravura concluded one of the most significant take-private B-BBEE deals in South Africa’s dealmaking history when they advised Alviva Holdings Limited (“Alviva”) in a transaction valued at R3.3 billion. Anticipated as a textbook example of a transaction, varied elements made it one of the trickier transactions to conclude.
Bravura was mandated to assist Alviva to unlock value for the company’s stakeholders. When Bravura Principal Llewellyn Gerber initially approached the Alviva board in November 2020, the market capitalisation of the company was approximately R1 billion, with very limited liquidity. It was evident that the company did not benefit from its listed status. In August 2021, Bravura embarked on a process to identify the right pools of capital to facilitate the delisting process. A consortium of equity investors was identified, which included the company’s B-BBEE partners, Alviva management and a private equity partner. Bravura also assisted in the structuring and implementation of a new management incentive scheme.
Bravura’s strategy had been to raise significant debt and leverage in order to implement a highly leveraged buy-out. However, emerging challenges complicated the transaction’s progress, requiring multiple solutions to keep it on track. The late withdrawal of the private equity partner resulted in an unexpected equity gap. The solution was to secure an innovative bridge facility that could be repaid from the disposal of assets. Furthermore, a post-Covid saturation of the European laptop market resulted in timed consignments arriving simultaneously in South Africa. The unavoidable stock surplus for Alviva necessitated a working capital solution to unlock liquidity.
At the time of the earliest engagements between Alviva and Bravura, it was envisaged that an offer to Alviva shareholders could be made at a price of R12 per share (a 100% premium to market value). By June 2022 a debt and equity package was secured. The offering consortium made an non-binding offer to acquire all the shares that they did not own for R25 per share. After engagement with shareholders, it became clear that shareholders would not support the delisting at that price, thus creating a new funding gap. In order to facilitate the shortfall, Bravura worked with Alviva management and determined that Alviva’s own balance sheet should release the shortfall in cash, if the working capital cycle normalised. However, the challenge was how to obtain certainty around the funding availability. Bravura yet again found an innovative solution: obtaining a third-party guarantee, backed by a combination of a convertible equity loan should the guarantee be called, as well as a ringfenced debt facility that was secured by the equity of a carved out subsidiary. This required a restructure of the group which, although highly complex, provided an elegant solution and allowed the offer price to be increased to R28 per share.
On 27 January 2023, 93% of shareholders voted in favour of the transaction. This unlocked immense value for the exiting shareholders (due to the share price increase from R6/share to R28/share), and provided additional incentivisation for management, all whilst concluding one of the most significant B-BBEE controlled take-private transactions in South Africa to date. This now positions the company to explore new initiatives in the future, thereby benefiting all stakeholders.
Llewellyn Gerber says, “This transaction was unexpectedly convoluted and complex, but the trusted and close working relationship between all transaction stakeholders held the process together for the duration.”
Bravura would like to extend a heartfelt thanks to all the parties involved in the transaction: the Alviva board, Alviva management, the consortium (and its shareholders and advisors), ABSA Bank, Anchor Capital, Westbrooke Alternative Asset Management, ENSafrica, Tugendhaft Wapnick Banchetti and Partners, Webber Wentzel and Deloitte.