![[Kenya] Digital credit provider Tala disbursed Sh240 billion in loans in eight years](https://theafricanbusiness.com/wp-content/uploads/2023/02/TALA-APP-360x180.jpg "[Kenya] Digital credit provider Tala disbursed Sh240 billion in loans in eight years 18")
Yet another South African industrial business with ambitions of empire-building in far-off markets has been forced into selling the business in a rush for 99% less than it paid for it just over a decade ago.
This is not quite Spar Group levels of insanity, where it lost $220 million on its misadventure in Poland (after buying the family-owned chain of supermarkets for the token sum of €1). In that transaction, it is literally paying the acquirer the $9.5 million it will ‘get back’ as the purchase price.
Here, at least the listed industrial business will get a tiny bit of cash.
Metair bought Mutlu, a battery (though this would quickly change to “energy storage”) business in Turkey, in December 2013 for $217 million.
The plan was simple: to capitalise on its and Mutlu’s relationships with carmakers (original equipment manufacturers or OEMs) across Europe, the Middle East, and Africa and start producing start/stop batteries in Turkey. After all, Mutlu was the biggest battery manufacturer in Turkey, never mind that the largest percentage of Multu Akü’s exports were to customers in Russia.
At the time, CEO Theo Loock told SAfm Market Update with Moneyweb that: “We worked for four years to conclude the acquisition, so we knew the company very well, and we normally … [inaudible] in the first two years of an acquisition to its third-year value out the company. But the challenge for us in the long term is to sell the spare capacity that we have in that facility and to penetrate the European market with our start/stop battery technology.”
50:50:50 strategy
This acquisition was part of Metair’s 50:50:50 strategy, where it wanted 50% of its business in the OEM sector, 50% of its business in the aftermarket (parts), and 50% of the overall group in batteries.
Once this was delivered in 2014, executives told analysts at an investor day in Turkey that the next plan was to focus on globalisation. It saw this as a two-step process that would eventually see it have operations producing 50 million batteries a year on five continents by 2020.
This was all predicated on its intellectual property and the “successful industrialisation” of start/stop (battery) technology.
It described this at the time as “the gateway technology in the pathway to full electric vehicle technology”.
In December 2015, Mutlu was producing 3.2 million batteries a year (more than the 2.2 million being produced by Metair’s South African operation First National Battery and the 2.2 million by Romanian subsidiary Rombat).
By 2022, Mutlu was producing 4.9 million batteries. However, the Turkish economy was increasingly tricky to operate in. A currency crisis in 2018 saw it revalue the lira, and sharp cuts to interest rates between 2021 and 2023 saw it depreciate by 60% against the dollar over this period.
Hyperinflation in Turkey began affecting Metair’s reported numbers, adding complexity and risk to what had been a fairly simple-to-understand business.
The group says in 2013, Mutlu “faced a number of additional challenges, including a shortage of contract workers and the loss of material export volumes, resulting in a drop in profitability, along with higher debt levels and increased working capital”.
This saw volumes plummet by a third to just 3.4 million (versus First National Battery’s 1.8 million and Rombat’s 2.3 million).
In 2013, Loock said the “transaction will enable us to capture a greater share of the anticipated growth in the market for start-stop batteries, with a total increased production capacity of 11.7 million batteries a year when combined with subsidiaries First National Battery and Rombat”.
It never really got much further than nine million.
Transition to electric vehicles
Navigating the transition from internal combustion engine (ICE) to electric vehicles and hybrids has been complex for many OEMs and the full effects of this throughout the value chain will be seen for some time to come.
It was announced that by 2035 no new ICE vehicles could be sold in the European Union (although the EU subsequently agreed to permit sales and registration of ICE models after this deadline, provided the vehicles operate only on carbon-neutral fuels, also known as e-fuels).
Metair finally reached an agreement with Quexco in September 2024 to dispose of the business for $110 million. At recent exchange rates, this equated to approximately $104 million in current terms (the $217 million it spent in 2013 was worth around the same at historic exchange rates).
According to the transaction circular, net proceeds were estimated to be $35 million after settling debt and working capital needs.
On 17 December, Metair announced that “Mutlu Group’s debt and accounts payable has increased substantially since September 2024 as a result of the requirement to fund operations in the continued challenging hyper-inflationary and high-interest rate environment”.
“It is currently expected that net proceeds of approximately $5 million will be realised.” That was about $5 million.
Days later, it said the disposal had been finalised “due to the liquidity pressure the Mutlu Group is under and the critical need for the capital restructuring to take place”. The purchaser had advanced Metair $1 million, but this may still be adjusted post-month-end.
It says: “The final Disposal Consideration shall not be more than $2 million or less than zero.”
Metair says the value of its Türkiye net assets as at 31 December 2023 was $150 million. Prepare for more write-downs in the next set of results.
The final setback? Metair spent $2.8 million to get rid of this business, mostly on investment bankers (RMB) and lawyers (Linklaters), almost exactly half the $5.5 million it spent on the transaction in 2013.
