Effective 1st April this year, PG Timbers and Builders Merchants Botswana (BMB) will join the market as the second largest building materials suppliers ÔÇô after Builders World Botswana.
This was confirmed by equity partners in both companies ÔÇô Venture Partners Botswana (VPB), this past week.
Giving a case study at the just ended 7th Africa Venture Capital Association (AVCA) conference in Gaborone, Chief Investment Officer of Venture Partners Botswana, Ndaba Mpofu, hinted at the possibility of a merger of the two firms.
In a separate interview with The Sunday Standard, his Managing Director, Anthony Siwawa, confirmed the merger, saying it would be effective as of April 1st this year.
In his case study, Mpofu told delegates of how they performed a successful surgery on a bed-ridden and condemned PG Timbers. By 2003, the company was on the brink of collapse and they breathed life into it by 2004. By then, management had bought the company and was following its downward sloping trend into the abyss. The take over was poorly timed, as that was the period of recession in the construction industry. Coupled with high overheads, weak management, poor controls and lack of strategic focus, it was inevitable that the roof trusses specialists were headed for imminent collapse. VPB entered the scene with radical changes, amongst others, the firing of management (who happened to be owners who invited them into the company), trimming staff complement from 235 to 130 employees and rationalizing branches by closing three of them. They equally brought in technological reforms into the firm.
“It was not really easy, particularly removing owners of the company from management. I think we all know that it is equally not an easy task to heave off over 100 people off their jobs,” he noted, saying however that it is what had to be done to turn the company around.
“At some point we even made it to newspaper headlines for some time,” he told the delegates, with a mocking smile.
The task was particularly made difficult by the fact that they entered the scene as minority shareholders, “but I must say we were greatly assisted by co-equity investors into the project ÔÇô African Banking Corporation”.
After implementing wholesale radical changes, the campus of profitability made a turn. Being comfortable in their success in both BMB and PG Timbers, they have decided to lump them together and are looking at exiting through Initial Public Offering in the next 18 to 24 months.
“The companies would retain their identity despite the merger. They have each built a significant brand and we agreed that we would not dilute that,” explained Siwawa.
He is excited that they have now built the country’s second largest suppliers of construction material, with the predominant participation of citizens.
“That is one area in which Batswana have been lacking,” he said.
VPB was formed in 2002 and is managing government’s CEDA Venture Capital Fund worth US$40 million (P240 million). The company has so far made a variety of successful investments, ranging from manufacturing, financial services, agriculture, information technology, logistics to construction. They have so far divested from one entity ÔÇô 4ms Logistics, realizing a gross rate of return of 19%.