Sure Kamhunga
16 July 2008
Johannesburg — DIVERSIFIED auction and asset services Alliance Group has sold a 31% stake to financial services group Transaction Capital. It is finalising the launch of a R500 million fund to help struggling homeowners and businesses to avoid financial ruin through the forced sales of their properties and assets.
The acquisition values Alliance at R250 million, CE Rael Levitt said yesterday.
Alliance is also eyeing possible acquisitions in Europe, with particular focus on the UK market, and SA , where consolidation is expected as competition squeezes marginal players .
Levitt said under the acquisition deal - approved yesterday by the Competition Commission - Amabubesi Investments, managed by businessmen Sango Ntsaluba and Peter Moyo, has diluted its stake in Alliance to enable Transaction Capital to subscribe for new ordinary shares.
Transaction Capital recently appointed entrepreneur Mark Lamberti, nonexecutive chairman of Massmart Holdings, as its executive chairman.
Alliance is setting up a specialist private equity team using expertise from Transaction Capital to spearhead acquisitions. Also, corporate recovery specialist Les Matuson has joined the board as an executive director to grow its advisory, restructuring and distressed asset services business.
Levitt said the acquisition by Transaction Capital had provided a much-needed equity injection to give the group muscle to grow the business.
The launch in three months of the distressed debt and asset fund was one of the key planks of the growth strategy. He said the fund was being launched at a time when thousands of families , particularly in the middle-income group, were struggling to keep up with mortgage payments. The fund would also offer a lifeline to companies in distress.
Levitt said the combination of dropping property values, rising interest rates and a global credit meltdown had put the domestic residential property market in a precarious position. Recent Alliance research showed 55000 families in SA would suffer mortgage stress and up to 8000 could lose their homes before year-end, unless they got help.
"We are now in the mid-cycle phase of a residential property slowdown . Overgeared middle-income families are the most vulnerable, but we are seeing upmarket homes hitting the distressed sales market," he said.
Mortgage stress is defined as being unable to meet repayments without refinancing, with many having to reschedule bond repayments.
"These are sobering figures. The scariest finding from our research is that once someone is in severe stress there is a 20 % chance of being forced to sell the property and only a 50% chance of getting out of mortgage stress altogether ," he said.
Levitt said banks had already signed up to the mortgage debt relief programme and were counselling defaulting and distressed clients with whom sales mandates will be signed directly.
"We have never seen such appetite from the banks to come up with debt recovery solutions, while defaulting homeowners are looking for any way to avoid legal process and the sheriff's sales in execution," he said.
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