Golden Sibanda : Senior Business Reporter
PG Industries says it has received a written offer from a prospective investor for the takeover of the business and injection of fresh capital. The group said submission of the offer follows subsequent discussions and negotiations after the investor had initially shown interest. PG first received a written “expression of interest” letter from the prospective international investor who completed a due diligence of the building material producer and retailer early last year.Successful conclusion of the discussions would result in the wholesome change in the make-up of PG shareholders, new payment plan to creditors and injection of fresh capital in the company.
If the negotiations are concluded successfully, then this may be implemented through a secondary scheme or similar corporate processes. Currently, PG is implementing a High Court sanctioned reconstruction plan approved by the court in April last year.
The group is being haunted by debts of over $21 million and serious funding challenges.
The unnamed prospective investor has offered to invest more funds to make a once off final settlement to creditors and also provide working capital for replacement and refurbishment of equipment. But “the offer is subject to the relevant regulatory approvals.”
Last year PG raised $3,2 million in new funding through property disposals, bank facilities and ordinary share capital injection.
Despite these efforts, the company still has a significant working capital gap while sales in its merchandising division remain low.
As such, PG said it is still in a precarious state despite narrowing losses with its balance sheet remaining in negative position.
The group said PG Merchandising’s performance continues to be negatively affected by poor stocking levels, but pointed out Zimtile’s sales and production is rising on high capacity utilization.
The group said that its losses for financial periods ending 31 December 2014 and 31 December 2015 narrowed due to significant savings in operational expenses and finance charges. Further, the building and hardware products manufacturer and retailer said it has not been able to make quarterly payments to concurrent creditors due on 16 October 2015 and 16 January 2016.
In a bid to improve viability, PG had successfully restructured its operations to reduce costs and enhance viability. This involved consolidating operations, centralizing back-offices and reviewing business models, which saw significant cost savings being realized.
The construction products manufacturer and retailer said last year that although demand in the construction industry was relatively healthy, its businesses could not fully exploit the opportunities.