Cape Town - Imperial Holdings, the transport and automotive company, surprised the market yesterday when it bought Safair, a wholly owned subsidiary of Safmarine and Rennies Holdings (Safren), for R230 million in cash.
Bill Lynch, the managing director of Imperial, said yesterday his group was already involved in aviation through Imperial Bank, which had an aviation leasing book of R500million.
"Safair is in the aviation leasing business, and that is part of the expertise of Imperial. The financing required by a business of the type of Safair and that provided by Imperial Bank are complementary," he said.
Lynch said other synergies included the fact that Imperial was a major transporter of goods and Safair was in air freight. "Carrying goods by air is simply a new dimension of our business."
Safair, with a fleet of 21 aircraft, was a rand hedge investment. Aircraft were bought and sold in US dollars, and although Safair charged in rands for work done in South Africa, it charged in dollars for work outside it.
Safair also had a big stake in Air Contractors, an aviation business in Ireland which leased its fleet of seven or eight aircraft to customers such as courier company DHL. "Safair has excellent management, and it will stay in place," Lynch said.
He noted that Safair earned R19,5 million in the year to June 30, putting the acquisition on a historical price-earnings ratio of 10,5 times. "The acquisition will enhance our earnings a share from the outset."
Safair's 21-plane fleet includes five McDonnell Douglas MD 80 and five Boeing 727-200 passenger aircraft, two Boeing 727-200 freighter aircraft and seven Lockheed Hercules freighter aircraft.
Lynch said the passenger aircraft were leased on long-term contracts to Sun Air and Comair.
He said the Hercules aircraft were leased to international companies and organisations like the UN, World Food Programme, Schreiner and Oil Spill Response Services, while the jet freighters were leased on long-term contracts to DHL, SAA and Rennies.
ING Barings, announcing the sale on behalf of Safren, said it would be effective from July 1 1998. Interest on the price of R230 million was calculated at 18 percent and taxed at 35 percent.
The effect would be to raise Safren's headline earnings by 2,9 percent to 70,9c.
Imperial closed 5c lower at R3,35 yesterday on the JSE.