Value Group rewards employees in BEE deal
2010-05-31
By Roy Cokayne
Value Group is proposing to enter into a R73 million black economic empowerment (BEE) transaction involving ANC treasurer-general Mathews Phosa and Mano Padiyachy, both directors of the listed transport and logistics group, and selected black employees of the group.
The proposed deal would see a 15 percent stake in the group sold to BEE partners. If the transaction is approved, Phosa will own about 7 percent, Padiyachy about 3 percent and qualifying black employees up to 5 percent of the group.
To prevent the possible future dilution of existing ordinary shareholders as a result of the transaction, the group plans to make a voluntary offer to repurchase 9.2 percent of eligible ordinary shareholders' shares for R3.60 in cash, subject to a maximum of 16.67 million shares being repurchased.
The group said the repurchase offer would constitute a current and future hedge against this dilution and would be funded out of cash and cash equivalents.
Clive Sack, the group's financial director, said the BEE transaction had been "a long time coming" but stressed it was critical for the group to do an ownership deal with BEE partners with whom they have had a long-term working relationship.
The group last year achieved a level 5 BEE rating, largely through its staff training, learnerships, bursaries and driver training initiatives.
But Sack said the element of ownership was critical in being a truly empowered company, raise its empowerment profile and help the group to retain and win new contracts.
It said the decision to propose a BEE transaction involving Phosa, Padiyachy and qualifying employees followed an extensive process.
Value Group decided to proceed with the transaction because the proposed BEE partners had contributed to the group's development and growth. They would also continue to be important in driving any future growth and they had a sound knowledge of the group's business, which allowed them to add value from the commencement of the transaction.
The proposed transaction would also assist the group in retaining and motivating key black employees.
The transaction will be implemented through the issue of 14.6 million ordinary shares to Opsiweb Investments, a special purpose vehicle wholly owned by the Nine Miles Trust, Phosa's family trust, for R51.1m. A further 6.25 million ordinary shares will be issued to Diplobuzz Investments, a special purpose vehicle wholly owned by the Padiyachy Family Trust, for R21.9m.
The shares are being sold at R3.50 a share, which represents a 3 percent discount on the volume weighted average price for the 30-day period to May 25, the day before the specific issue of shares to Phosa and Padiyachy was agreed upon.
The sale of the shares to Phosa and Padiyachy, which will be issued from Value Group's unissued ordinary share capital, are subject to a seven-year lock-in period. Value Group will have a pre-emptive right over the subscription shares.
Value Logistics will fund the total subscription price by subscribing for variable rate cumulative preference shares in the special purpose vehicles of both Phosa and Padiyachy.
Both these special purpose vehicles will be obliged to declare and pay a preference dividend equal to any Value Group distributions received in terms of the BEE transaction immediately after these distributions are received.
The transaction is subject to the fulfilment of certain conditions, including the approval of shareholders and the JSE. The repurchase offer opens on June 28 and the meeting of shareholders to vote on the transaction will take place on July 16.
Value Group's shares on the JSE yesterday closed 5.3 percent higher at R3.79.
Published on the web by Business Report on May 27, 2010.
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