Deal Summary
Old Mutual Private Equity (OMPE) and Sphere Holdings (Sphere), alongside Much Asphalt’s management, are acquiring Much Asphalt (Pty) Limited (Much Asphalt) from AECI Limited for R1.1 billion ($62.3 million) in a part-equity, part-debt transaction. Much Asphalt, South Africa’s leading asphalt and bituminous products manufacturer for road construction and maintenance, is the only asphalt producer with a national footprint and has operated in Namibia since 1989.
This transaction marks the first investment from OMPE Fund VI, launched in December 2023. Expected to close in Q1 2025, it has received Johannesburg Stock Exchange (JSE) approval and awaits regulatory clearance. The deal, subject to a “locked-box” structure effective 31 December 2024, caps the net consideration payable at R1.5 billion ($85.5 million). As such, AECI cannot make any payments or transactions that affect the company’s net asset value after this period, thus limiting financial exposure for OMPE and Sphere. AECI previously acquired a 98%
Deal Rationale
As the leading producer of asphalt and bituminous products in South Africa, Much Asphalt is positioned to capitalise on the expected increase in infrastructure investment, particularly under the newly formed Government of National Unity (GNU) in South Africa. Much Asphalt’s 2016 acquisition of SprayPave, with its state-of-the-art bitumen converter, strengthens its supply chain and product quality. This acquisition provides critical access to high-demand bitumen grades and a more diverse product range that meets stringent durability standards for roads in high-temperature and high-load areas, aligning with South Africa’s urgent infrastructure needs. By acquiring this strategic asset, OMPE and Sphere can harness Much Asphalt’s existing operational efficiencies and strategic footprint to meet anticipated public and private sector demand while enhancing product sustainability.
The deal also aligns with OMPE Fund VI’s strategy of partnering with like-minded investors and working with management teams to invest in unlisted South African companies with strong commercial and social impact potential. Meanwhile, driven by its ambition to become the world's third-largest mining solutions company by 2030, AECI outlined plans to dispose of non-core assets such as Much Asphalt and its Animal Health business.
- Market Opportunity: The GNU’s infrastructure agenda lays a strong foundation for growth in the asphalt and construction materials market. As nearly 60% of South Africa’s roads are in poor condition, the South African National Roads Agency Limited (SANRAL) estimates that approximately R307 billion (~$17.5 billion) is required for repairs and upgrades, indicating considerable latent demand for high-quality asphalt products. To address this, the South African government is expected to increase capital spending on infrastructure projects by 11% over the next four years. Additionally, the 2024 Infrastructure Development Plan has highlighted key projects in transport and logistics, potentially driving a forecasted CAGR of 5.25% in the country’s asphalt sector through 2032. Much Asphalt’s national footprint, combined with its bitumen technology, places it in a prime position to service both metropolitan and rural projects. The company’s ability to produce high-durability asphalt means it is well-prepared to support projects that address climate resilience—a growing consideration as South Africa seeks to improve infrastructure that can withstand severe weather events.
- Risk/Return Analysis: The primary risk to Much Asphalt’s growth trajectory is the dependency on anticipated public infrastructure spending. Delays or cutbacks in government spending, compounded by administrative challenges within regional and municipal project management, could impact demand for asphalt in the near term. Furthermore, dependence on bitumen—a by-product of crude oil refining—exposes Much Asphalt to global oil price volatility. As geopolitical tensions in oil-producing regions persist, input costs may become increasingly unpredictable, squeezing margins and potentially impacting project profitability. Additionally, a protectionist policy stance may emerge with the US election currently unfolding. Trump’s past emphasis on prioritising domestic energy production could heighten oil market volatility, influencing bitumen costs. Moreover, renewed tensions with China—a core aspect of his previous administration’s agenda—could disrupt global supply chains, affecting input costs for bitumen-dependent sectors. Finally, the transaction’s valuation, set at R1.1 billion ($62.3 million)—reflects a substantial markdown from the R1.988 billion price AECI initially paid in 2017, underscoring a degree of caution in the investment community regarding South Africa’s infrastructure ecosystem and broader economic uncertainties.
About the Fund Managers
Old Mutual Private Equity (OMPE) is an independent business unit (fund manager) under Old Mutual Alternative Investment (OMAI), the alternative investments arm of Old Mutual Limited, a diversified African financial services group. Established in 2000, OMPE mainly invests in medium-to-large companies operating predominantly in South Africa. The fund manager has launched six funds since inception, investing roughly R12 billion across nearly 40 transactions and 24 exits. It launched its sixth fund—Old Mutual Private Equity Fund VI—in 2023, with a mandate to allocate up to 25% of raised capital in the Rest of Africa, with a preference for East Africa. OMPE has been involved in some of the largest private equity de-listings (e.g. Pepkor, Consol, Life Healthcare, and Long4Life), some of the largest private equity exits (e.g. Consol and Pepkor), and some of the largest private equity IPO’s (Life Healthcare).
Sphere Holdings Pty Ltd, founded in 2003, is a South African investment holding company focused on creating value for funders, shareholders, and business partners through partnerships with privately owned businesses in strategic sectors. Sphere’s Private Equity Fund I (R302 million) is backed by pension funds, DFIs, and financial services companies. With investments in sectors such as industrial services, financial services, and technology—including notable stakes in Babcock, BBD and Consol—Sphere prioritises sustainable growth within South Africa. In 2023, Sphere Holdings acquired 25.1% of Pogir Group in South Africa, an insurance brokerage firm offering its customers personal and business insurance.
