Sept. 25 (Bloomberg) -- Iliad Africa Ltd. fell the most in eight years on the Johannesburg stock exchange after the South African building-materials distributor said takeover talks with Barclays Plc's local private equity arm have ended.
Iliad slid 3.70 rand, or 17 percent, to 17.80 rand. It was the biggest fall since Feb. 18, 1999, cutting the company's market value to 2.75 billion rand ($390 million). The financial structure of the proposal from Absa Group Ltd., controlled by Barclays, and other investors wasn't feasible, Johannesburg- based Iliad said today.
The withdrawal by Absa Group, part of South Africa's biggest consumer bank, followed a period of due diligence into the maker of cement and bathroom fittings against a backdrop of rising interest rates. The buyout group had been considering a possible 24 rand-a-share offer, 33 percent more than Iliad's close on June 7, the day before talks were announced.
``The debt was probably too expensive to raise'' so they walked away, said Mauwane Kotane, a trader at Nedbank Group Ltd.'s BoE Stockbrokers in Johannesburg. ``There was a bid premium built into the price.''
``The consortium indicated that its decision did not reflect in any way on its perception of the underlying value of Iliad,'' the South African company said in a statement.
The nation's central bank has increased its benchmark interest rate six times since June 2006 to a four-year high of 10 percent. Investor willingness to provide loans for buyouts has diminished after rising U.S. subprime mortgage defaults spurred a global credit crunch.
Absa informed Iliad about its planned exit in a letter at the end of Friday and no meetings have yet been held, Howard Turner, Iliad's chairman, said in an interview today. The group hasn't said why the capital structure it had considered for the transaction wouldn't work, he added. Andre Pieterse, head of equity investments at Absa Capital, declined to comment.
Iliad, which posted a 36 percent in first-half profit, is benefiting as South Africa's construction industry has its biggest boom in 25 years. Infrastructure spending is surging in preparation for soccer's 2010 World Cup.
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