Hudaco has entered into an agreement with Insulation Advanced Technologies, Isotec Balancing, Isomec, and Moholi Supplies, collectively referred to as Isotec, to acquire its trading assets and liabilities.
The acquisition price will be based on a multiple of Isotec’s average annual profit after tax over the three years following the effective date, with a maximum consideration of R709 million.
Hudaco will fund the acquisition using internally generated cash, existing financial facilities, and, if necessary, new financing. An initial amount between R250 million and R287 million will be payable in cash on the effective date, while three additional tranches will be payable in cash two months after the first, second, and third anniversaries of the effective date, contingent on Isotec’s profitability during those years.
The effective date of the transaction will be either the first day of the month following the fulfilment of all conditions precedent or 1 March 2025, whichever is later.
Anthony Schimper, the current managing director and beneficial owner of Isotec, will enter into a three-year employment contract as part of the agreement. He has also agreed to a five-year restraint of trade arrangement post-employment in favour of Hudaco.
Isotec is a leading South African provider of insulation materials and solutions.
The company manufactures and distributes thermal and electrical insulation materials used primarily in transformer and electrical motor manufacturing and repair. Its customer base spans industries including manufacturing, mining, railways, power generation, and switchgear production.
Isotec’s core operations involve insulating copper and aluminium conductors and producing composite materials tailored to customer specifications. The company operates in five locations across South Africa, employs 119 people, and generates approximately R500 million in annual revenue.
Completion of the transaction is subject to several conditions, including a satisfactory due diligence review, written approval from major suppliers and customers confirming their intent to continue business relationships under existing terms, the successful negotiation of a new lease agreement for Isotec’s primary premises, and the execution of employment contracts and restraint of trade agreements for key personnel, including Schimper.
Additional approvals are required from Isotec’s shareholders, the Competition Commission, the Hudaco board, and any relevant regulatory bodies.
For the financial year ending 29 February 2024, Isotec recorded a profit after tax of R69 million, with a net asset value of R152 million. Adjusted for transaction-specific elements, the profit after tax stands at R90 million, with an estimated net asset value of R250 million at the effective date. The financial information is sourced from audited financial statements prepared in accordance with International Financial Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs) and South African Companies Act requirements.
Hudaco’s acquisition of Isotec marks a strategic expansion into the electrical insulation sector, reinforcing its market position and growth prospects in South Africa.
Strategic Rationale
Hudaco specialises in the importation and distribution of high-quality branded automotive, industrial, and electronic consumable products in southern Africa.
One of its key strategic objectives is to acquire businesses within complementary sectors when suitable opportunities arise.
The acquisition of Isotec aligns with Hudaco’s strategy to diversify its portfolio. Isotec’s product and service offerings complement Hudaco’s existing capabilities, particularly in the electrical power transmission sector, where it operates through subsidiaries such as Powermite and Varispeed.
The transaction will enable both companies to develop new routes to market, expand their customer base, and create synergies.
Additionally, Isotec’s B-BBEE rating is expected to improve significantly post-acquisition. Hudaco aims to leverage its expertise in value-added distribution to strengthen Isotec’s market position, delivering long-term benefits to shareholders.
