Major company in business rescue in South Africa a step closer to being saved

The Competition Commission has supported the proposed takeover of AutoZone, helping save the company after it entered a business rescue earlier this year.

AutoZone is the largest privately-owned distributor of auto parts, spares and car accessories in South Africa, with approximately 169 retail stores and 7 QSV stores. It also employs over 1,400 people.

AutoZone is a wholesaler and retailer of a wide range of aftermarket automotive parts, spares and car accessories, such as batteries, brake components (pads, discs, cylinders), shocks, gaskets, gearboxes, engine parts, oil pumps and other heavy-duty parts.

The company entered into business rescue proceedings on 1 July 2024 as it could not pay off its debts when they became due in the following six months.

The group underwent a private equity deal in 2014, but its performance did not meet expectations due to the poor performance of the South African economy, which was worsened by the Covid-19 pandemic, civil unrest and a period of stagflation.

However, JSE-listed investment group Metair announced on 4 October that it would acquire AutoZone for R290 million.

The Metair Group supplies vehicle components to vehicle manufacturers, vehicle dealerships and automotive aftermarket parts wholesalers.

As of 1 July 2024, the value of AutoZone’s net assets, excluding liabilities that are subject to the Business Rescue Plan was roughly R485 million, including net working capital of R421 million.

In good news for the company, the Competition Commission has recommended that the Competition Tribunal has approved the transaction whereby Nikisize, a wholly owned subsidiary of Metair Limited, intends to acquire AutoZone.

To address any supply concerns, the Metair Group agreed to conditions that will ensure AutoZone’s competitors continue to receive Metair group’s automotive aftermarket parts post-merger.

“The merging parties have also agreed to conditions that will ensure the competitively sensitive information of their respective competitors will not be used to dampen competition,” said the Commission.

The Commission added that the proposed conditions address any concerns that may arise.

To address public interest concerns, the parties agreed not to retrench any AutoZone as a result of the merger for 36 months from the merger approval date.

Business Rescue changes

Autozone is not the only South African company that looks set to survive business rescue proceedings.

West Pack Lifestyle recently survived business rescue proceedings after a private buyer purchased its businesses and assets.

The popular retailer voluntarily initiated business rescue proceedings in May, as it was financially distressed and, like AutoZone, unable to pay its debts when they became due over the following six months.

A final offer was accepted in October, which saved over 1,100 jobs, 30 corporate stores, 40 franchise stores and the overall West Pack brand.

That said, not all companies in business rescue are able to be saved.

The JSE-listed electronics manufacturer Ellies was recently liquidated after its business rescue practitioners saw no reasonable prospect of the company being saved.

This was also the case for retailer Frame Leisure Trading, which operated The Cross Trainer, and solar company Hohm energy.

Read: Big tolls announcement for South Africans planning to travel on the N4 next month