Lonrho (AIM: LONR) announced that it has now completed its acquisition of the John Deere and Komatsu dealerships in Mozambique. The deal has been completed in line with the formal heads of agreement, signed on 18 February 2010.
According to Lonrho, Mozambique's agricultural, construction and mining equipment market is growing due to the number of industrial scale developments including agricultural, bio-fuel and large coal and mineral projects. Lonrho said it is looking to build the dealerships' revenues and profit substantially over the coming years.
The company bought the licensed John Deere and Komatsu dealerships from Trak-Auto Lda, in a deal worth up to US$5m. Lonrho intends to support the business by arranging new working capital to fund the dealerships future growth.
Under the terms of the deal, Lonrho will initially pay US$2 million in cash, with three annual payments of US$1m due, subject to certain performance criteria. Trak-Auto holds the exclusive licences for both John Deere and Komatsu products in Mozambique and sold 104 John Deere units and 13 Komatsu units in 2009. In the previous year ended December 2008, the dealerships recorded sales of US$9.9m with a gross profit of US$1.4 million. The existing Trak-Auto management will remain with the business.
The acquired businesses will supplement the investment company's existing portfolio of agriculture businesses, including the 51% held primary Agribusiness, Rollex SA. Rollex provides fresh produce and fish and operates both within Africa and through exports to Europe. On the African continent, Rollex supplies large South African supermarkets, notably Rollex is now the preferred supplier to two chains, Pick&Pay and Spar.
Last month, the African focused investment company was promoted into the FTSE AIM UK 50 Index and the FTSE AIM 100 Index. The company said that inclusion in the key indices reflects Lonrho's growth and its position in London's junior market.
Lonrho has five reporting divisions all of which, in its Q1 results, reported a continued expansion with several operational highlights, as Lonrho said that the group's core markets showed growth across the continent despite the global economic crisis.
The divisions are Infrastructure, Agribusiness, Regional Transportation, Support Services and Hotels.
Lonrho also has a 24.61% stake in its Zimbabwe focused associate company, LonZim (AIM:LZM), which in January announced it is delivering strong growth as the general Zimbabwe market begins to recover.
Disclosure: The author holds no positions in the company