Stefanutti Stocks Holdings, through its wholly owned subsidiary Stefanutti Stocks, is to acquire the entire issued share capital of Cycad Pipelines and its related property holding companies.

The Cycad Group, which is made up of Cycad Pipelines, Cycad Construction and two property holding companies, is a specialist pipeline construction and refurbishment contractor with its head office based in Nuffield, Springs, east of Johannesburg.

Stefanutti Stocks has entered into an agreement with the Bortan Trust, Alfred Henry Smith and Burcron Props 15 to acquire Cycad Pipelines and its related properties for a total purchase consideration of R298 million and R8 million respectively.

The business has been in existence for over 22 years and is focused on the construction of major new pipelines and the refurbishment of existing pipelines. Gas, oil, water, sewerage and effluent pipelines are built or refurbished in steel, plastic, concrete and other specialist materials.

The business has over recent years, as a result of its significant and ongoing investment in plant, equipment and human resource capital, positioned itself as one of the premier contractors in the pipeline construction market and is able to execute contracts of all sizes.

For the year ended February 2011 the Cycad Group reported an operating profit and a profit after tax of R61.4 million and R50.6 million respectively. The turnover of the Cycad Group varies depending on whether or not the pipes required for the contract are either supplied by the client as free issues, or have to be purchased as part of the contract price.

Prior to the implementation of the transaction, the business of Cycad Construction would be amalgamated with that of Cycad Pipelines so that the Cycad Group's business would be housed entirely within Cycad Pipelines, Stefanutti said.

The purchase consideration would be settled in cash, utilising an element of existing cash resources and external borrowings, once all conditions precedent to the transaction had been fulfilled or waived.

Stefanutti said that it had indentified the pipeline construction market to be a growth sector within the South African economy and in order to be well positioned within the sector and to be able to capitalise on the infrastructure spend, Stefanutti Stocks had taken a strategic decision to acquire the Cycad Group.

It recently co-operated on a number of joint ventures with the Cycad Group and concluded that the cultures of the two businesses complimented one another, and significant strategic benefits could be achieved through this acquisition.

The Transaction would also provide Stefanutti Stocks with the prospects of expanding its current service offerings to its clients; participation in the pipeline construction market with good long term growth prospects; enhancing the enlarged Stefanutti Stocks group access to specialist skills, asset base and management capacity; and improved operating margins.

The Cycad Group's order book stands at R527 million.

The deal in subject to conditions, including the granting of all regulatory approvals or clearances that might be required by the Competition Tribunal and the Takeover Regulation Panel.

The effective date of the acquisition is 1 November 2010.