| Thu 12 Jun 2008, 7:30 | | BAW / BAWP - Barloworlds 10% Broad-Based Black Ownership Initiative |
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BAW BAWP
BAW
BAW / BAWP - Barloworlds 10% Broad-Based Black Ownership Initiative
Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06)
JSE share code: BAW
JSE ISIN: ZAE000026639
JSE share code: BAWP
JSE ISIN: ZAE000026647
("Barloworld")
BARLOWORLD`S 10% BROAD-BASED BLACK OWNERSHIP INITIATIVE
1. Introduction
Further to the announcement on SENS and in the press on Monday, 12 May 2008,
Barloworld is pleased to announce a black ownership initiative for the
subscription of a 10% shareholding in the ordinary share capital of
Barloworld by a broad-based grouping of black entities, upon the terms set
out below ("the black ownership initiative"). The salient features of the
black ownership initiative are summarised as follows:
- transaction value of R2.4 billion, based on the 30-day volume weighted
average share price ("VWAP") of R103.87 per ordinary share in the share
capital of Barloworld calculated for the 30 trading days ending at the
close of trading on Friday, 6 June 2008 ("price calculation date");
- the participation of a broad-base of groups through the inclusion of
employees of Barloworld`s South African operations, persons with
educational needs, black non-executive directors of Barloworld,
community service groups and strategic black partners;
- effective black ownership of approximately 29% of Barloworld`s South
African operations after excluding mandated investments and offshore
assets;
- the participants in the black ownership initiative will benefit from
Barloworld`s growth locally and internationally as their shareholding
is at the listed company level; and
- facilitation by Barloworld of the black ownership initiative.
Simultaneously with the black ownership initiative, Barloworld will be
raising long-term debt of R1 504 million to replace current short-term debt.
The black ownership initiative and the borrowing referred to above are
subject to the fulfillment of the conditions precedent set out in paragraph
9 below, including shareholder approval.
2. Rationale for the black ownership initiative
Barloworld recognises the importance of Broad Based Black Economic
Empowerment ("BBBEE") to achieving a sustainable economic and political
environment in South Africa. To this end, Barloworld has developed a
strategy to support the principles of BBBEE, which aims to achieve:
- a meaningful number of black directors and executives in Barloworld and
its subsidiary companies;
- a staff complement that reflects South Africa`s diverse demographic
profile;
- procurement policies that recognise BBBEE; and
- social development programs that are primarily directed at developing
and empowering previously disadvantaged communities.
In February 2007, the Department of Trade and Industry ("DTI") issued the
Codes of Good Practice on BBBEE, in terms of section 9 of the Broad Based
Black Economic Empowerment Act, 2003 ("the Codes"). The Codes set out the
criteria to be met by South African companies to ensure that commercial and
sustainable solutions are found to support the imperatives of BBBEE. With
the Codes now published, Barloworld is able to assess Barloworld`s BBBEE
credentials and take initiatives to obtain significant BBBEE scorecard
points as contemplated by the Codes.
The board of directors of Barloworld ("the Board") believes that the black
ownership initiative embraces the spirit of empowerment whilst achieving the
requirements of the Codes and the goals of its BBBEE strategy.
3. Overview of the black ownership initiative
3.1 The participants
The black ownership initiative comprises four components, namely:
- a strategic black partner component, which will hold in aggregate 5.88%
of the issued ordinary share capital of Barloworld;
- an employee component (including black non-executive directors), which
will hold in aggregate 2.39% of the issued ordinary share capital of
Barloworld;
- an educational trust component, which will hold 0.78% of the issued
ordinary share capital of Barloworld; and
- a community service group component, which will hold in aggregate 0.95%
of the issued ordinary share capital of Barloworld.
The employee component includes black managers, black non-executive
directors and black and white (but primarily black) non-managerial
employees. The educational trust component comprises a trust established for
the education and developmental needs of primarily black persons. The
community service group component includes organisations, independent from
Barloworld, which have been established for the benefit of various South
African communities. The strategic black partner component includes
strategic black partners that bring with them experience and expertise that
will add value to Barloworld`s business.
The black ownership initiative participants (collectively, "black
participants") comprise the following:
- strategic black partners ("SBPs"), being the Gandaganda Empowerment
Trust ("Gandaganda"), the Y Akoo Family Trust and the Jubada Akoo
Family Trust (collectively referred to as the "Y J Family Trusts"),
Zwavhudi Investment Holdings (Proprietary) Limited ("Zwavhudi"),
Ayavuna Women`s Investment (Proprietary) Limited ("Ayavuna"), Izingwe
BAW Holdings (Proprietary) Limited ("Izingwe") and Moty Capital
Partners Consortium (Proprietary) Limited ("Moty"), which, among them,
will acquire 5.44% of the issued ordinary share capital of Barloworld
following the implementation in full of the black ownership initiative
("Barloworld`s increased share capital");
- Barloworld is currently in negotiations with an additional SBP with an
existing relationship with Barloworld, for the acquisition of 0.44% of
Barloworld`s increased share capital (the financial effect of this
shareholding has been excluded from the economic cost referred to in
paragraph 7 below);
- a trust ("the Black Managers Trust"), established for the empowerment
of current as well as future black managers employed in the South
African operations of Barloworld and its subsidiaries ("the Barloworld
Group"), which will acquire 1.35% of Barloworld`s increased share
capital;
- a trust ("the Black Non-Executive Directors Trust"), established for
the benefit of Barloworld`s current black non-executive directors,
which will acquire 0.04% of Barloworld`s increased share capital;
- a trust ("the Education Trust"), established for the education and
developmental needs of primarily black persons, which will acquire
0.78% of Barloworld`s increased share capital; and
- community service groups ("CSGs"), being the DEC Investment Holding
Company (Proprietary) Limited ("DEC"), the Ikamva Labantu Empowerment
Trust ("Ikamva") and the Shalamuka Foundation ("Shalamuka"), which,
among them, will acquire 0.95% of Barloworld`s increased share capital.
In addition, a trust ("the General Staff Trust") will be formed for the
benefit of current black and white South African employees (at least 60% of
whom will be black), employed in the South African operations of the
Barloworld Group and not participating in any other Barloworld share
incentive scheme or the Black Managers Trust, which will acquire 1.00% of
Barloworld`s increased share capital.
3.1.1 The SBPs
Barloworld wishes to include, among the black participants, leading black
business groups. Six SBPs have been identified to participate in the black
ownership initiative, three of which have an existing relationship with
Barloworld.
Gandaganda, the Y J Family Trusts and Zwavhudi are black owned and
controlled entities that have been involved in businesses similar to some of
the businesses conducted by Barloworld. Individuals from these entities have
joined Barloworld at different operational levels, where they add value to
the relevant businesses.
It is intended that an additional SBP with an existing relationship with
Barloworld will be introduced, which will acquire 0.44% of Barloworld`s
increased share capital. It is further intended that this partner will be
involved in Barloworld`s automotive operations. Barloworld is currently in
negotiations with that SBP.
3.1.1.1 Gandaganda
Gandaganda is a black empowered trust comprising of entrepreneurs and
emerging business women. It is a vehicle set up by Dominic Sewela, Chief
Executive Officer of Barloworld Equipment (South Africa), to participate in
the black ownership initiative.
The key beneficiaries are:
- Katlego Le Masego Trust, which is the family trust of Dominic Sewela;
- Venus Management Services (Proprietary) Limited, whose sole shareholder
is Moses Moloele;
- Dr. Tshomoko Reuben Sethulane Mahlare; and
- Basadi Empowerment Trust, led by Helen Mokgosi.
In addition, an employee trust is to be formed, which will be a beneficiary
of Gandaganda. The beneficiaries of that trust will be black employees of
Barloworld Equipment (South Africa). The employees that participate in this
trust will not participate in the Black Managers Trust.
3.1.1.2 The Y J Family Trusts
Yunus Akoob Khamissa and Jubada Akoob Khamissa, the founders of the Y J
Family Trusts, have an existing business relationship with Barloworld
through jointly operating various motor dealerships. The key trustees and
beneficiaries are Yunus Akoob Khamissa and his two sons Hassan Akoob
Khamissa and Nizam Akoob Khamissa.
The Akoob Khamissa family has been very successful in the retail motor
industry since 1980. Since 2003 the Akoob Khamissa family has been involved
with Barloworld in a joint venture which owns Mercedes Benz, Chrysler, Jeep,
Dodge, Subaru, Mitsubishi and Freightliner franchises in Durban and
Pietermaritzburg.
3.1.1.3 Zwavhudi
Zwavhudi is a company that was founded by Litha Nkombisa and Ciko Thomas,
who both currently work for Barloworld. Litha is the Chief Executive Officer
of Barloworld Motor Retail Southern Africa, while Ciko is Marketing Director
for Barloworld Automotive. Litha and Ciko were joint owners of Joburg City
Auto BMW and VW Joburg City prior to joining Barloworld.
Zwavhudi`s aim is to look for value-adding strategic investments and
partnership in the transport and related sectors in South Africa and the
rest of the continent. Each of Litha and Ciko holds his shares in Zwavhudi
through family trusts.
In their new roles as executives within Barloworld Automotive, Litha and
Ciko`s proven record of success as entrepreneurs, managers and business
people, will add immediate value in the Barloworld spectrum of business
operations.
Ayavuna, Izingwe and Moty are black controlled entities. Their respective
shareholders include some of South Africa`s most influential individuals,
who are highly respected in the business arena.
3.1.1.4 Ayavuna
Ayavuna is an investment company, owned and managed by black women, who have
enjoyed great success in business in South Africa and bring this experience
to those companies they invest in. They are selective in terms of where they
invest as one of their core principles is value add. Ayavuna was founded by
Hixonia Nyasulu, who is the executive chairman of Ayavuna.
Ayavuna has the following shareholders:
- Mawavune Women`s Investments (Proprietary) Limited (35%);
- the Nyasulu Family Trust (25%);
- The Standard Bank of South Africa Limited (20%);
- the Ayavuna Employee Share Incentive Trust (10%); and
- the Ayavuna Trust (a community trust) (10%).
One of the key principles that underpins Ayavuna`s investment choices since
inception is to ensure that Ayavuna leaves footprints for posterity and
where better to embed this philosophy but with women. To this end, in the
past financial year, the Ayavuna Trust has made a distribution in excess of
R3 million to its three beneficiary schools, which are high schools for
young women in rural South Africa.
3.1.1.5 Izingwe
Izingwe is a special purpose vehicle established for the black ownership
initiative, and has materially the same indirect shareholders as Izingwe
Holdings (Proprietary) Limited ("Izingwe Holdings"), which is led by Sipho
Pityana. Izingwe Holdings is a significant investor in mining, engineering
and infrastructure development and suppliers to those sectors. It also has
strong partnerships in the financial services sector. It is an active and
long-term shareholder that makes focused and value enhancing interventions
for its underlying investments. Its investments include AngloGold Ashanti
plc, Aberdare Cables (Proprietary) Limited, Scaw Metals South Africa
(Proprietary) Limited, Old Mutual plc and Nedbank Group Limited.
3.1.1.6 Moty
Moty is a broad-based company, comprising experienced black business people,
trade and hawkers associations, charitable trusts and youth. Moty is led by
Bheki Sibiya (Chairman), Bridgette Radebe, Lawrence Mavundla and Owen
Maubane, who are all experienced business people.
- Moty`s shareholders are:
- Moty Capital Partners (Proprietary) Limited (22%);
- Mmakau Investments (Proprietary) Limited (investment vehicle owned by
Bridgette Radebe) (15%);
- Bheki Sibiya (18%);
- Renaissance Mining and Exploration (Proprietary) Limited (black
professionals) (10%);
- The Ibhongo Trust (a trust set up for the benefit of primarily the
grandchildren of former President Nelson Mandela) (5%);
- MaAfrika Tikkun (an association incorporated under section 21)(6%);
ACHIB (African Cooperative for Hawkers and Informal Business)
Empowerment Trust (12%);
- the National Industrial Chamber Trust, a NAFCOC affiliate (5%); and
- an additional 7% is held by various black professionals.
Moty`s indirect shareholders include the Ithuba Trust (a charitable trust),
which holds its interest in Moty through Moty Capital Partners (Proprietary)
Limited.
Through its shareholders and directors, Moty is well placed to add value to
Barloworld by providing a ready market for Barloworld`s products, assisting
it in expanding into African markets, and by providing transformation and
leadership skills. Parts of Moty`s shareholding base in mining and
resources, and supply chain management provide a complementary business
focus.
3.1.2 The Black Managers Trust
Barloworld believes that an effective way to achieve broad-based black
ownership is to empower its black staff. It is proposed that the Black
Managers Trust be established for the benefit of current and future black
managers employed in the South African operations of the Barloworld Group,
in order to attract, retain and incentivise them.
Barloworld currently has approximately 140 black managers who will become
vested beneficiaries of this trust. An internal committee has been
established and tasked with formulating the criteria to determine the level
of participation of black managers, employed in the South African operations
of the Barloworld Group, in the Black Managers Trust on an equitable basis.
The beneficiaries of the Black Managers Trust will elect three of the five
trustees of the trust from amongst themselves.
Dominic Sewela, Litha Nkombisa, Ciko Thomas, Yunus Akoob Khamissa, Hassan
Akoob Khamissa, Nizam Akoob Khamissa, Isaac Shongwe and Mxolisili Kobus will
not be beneficiaries of the Black Managers Trust as they are already
participating in the black ownership initiative through their interests in
the SBPs or other BBBEE initiatives in the Barloworld Group.
3.1.3 The Black Non-Executive Directors Trust
Barloworld has included its black non-executive directors in the black
ownership initiative. The black non-executive directors of Barloworld who
are proposed as beneficiaries of the Black Non-Executive Directors Trust are
Dumisa Ntsebeza, Selby Baqwa and Bongi Mkhabela.
Hixonia Nyasulu will not be a beneficiary of the Black Non-Executive
Directors Trust as she already has an interest in Ayavuna, which is
participating in the black ownership initiative as an SBP.
There will be one Barloworld-appointed trustee of the Black Non-Executive
Directors Trust.
3.1.4 The Education Trust
The Education Trust will be established to provide educational grants and/or
other benefits primarily to black persons within the framework established
by Barloworld and identified by the trustees of the Education Trust. Any
person with qualifying educational needs will be eligible to participate in
the trust, provided that at least 85% of the income of the Education Trust
benefits black people.
The Education Trust will have five trustees. The majority of the trustees
will be independent of Barloworld, and the composition of the trustees will
meet the requirements prescribed by the Codes.
3.1.5 The CSGs
Barloworld believes that BBBEE is well served by allowing organisations that
are broad-based and community focused to participate in the black ownership
initiative. The DEC, Ikamva and Shalamuka are entities for the benefit of
broad-based groups, the objectives of whom are the upliftment of previously
disadvantaged communities.
3.1.5.1 DEC
DEC is wholly owned by the Disability Empowerment Concerns Trust ("the DEC
Trust"). The DEC Trust was established in 1996 by seven non-governmental
organisations representing people with disabilities.
- The key beneficiaries are:
- The Thabo Mbeki Development Trust for Disabled People;
- The Deaf Federation of South Africa;
- Disabled People South Africa;
- National Council for Persons with Physical Disabilities in South
Africa;
- South African Federation for Mental Health;
- South African National Council for the Blind; and
- Epilepsy South Africa.
DEC was established to engage in business ventures in the context of BBBEE.
3.1.5.2 Ikamva
Ikamva is an empowerment vehicle for Ikamva Labantu, a non-governmental and
non-profit organisation ("the Ikamva Labantu organisation"). The Ikamva
Labantu organisation provides core services to communities, including
primary healthcare, education and skills development, food security and
enterprise development, and land and buildings. Ikamva has two
beneficiaries, namely the Ikamva Labantu organisation, which has members
that are community based organisations which serve community groupings that
benefit disadvantaged, disabled, indigent, unskilled and poor people; and
the Ikamva Labantu Trust, which was set up to benefit the Ikamva Labantu
organisation.
3.1.5.3 Shalamuka
Shalamuka is a trust formed in 2006 to raise long-term, sustainable funding
for the highly regarded Penreach Whole School Development Programme
("Penreach"). Penreach is a programme which develops teaching skills by way
of workshops attended by over 2 000 public schools teachers from
approximately 900 schools. Over 95% of the beneficiaries of Penreach are
black, rural South Africans, of which at least 90% are black rural women. It
is estimated that over 350 000 learners from rural areas benefit from
Penreach annually.
3.1.6 The General Staff Trust
In order to incentivise and retain the non-managerial employees of the
Barloworld Group, it is proposed that the General Staff Trust be established
for the benefit of current black and white South African employees of the
Barloworld Group. The beneficiaries of this trust will not participate in
any other Barloworld share incentive scheme or in the Black Managers Trust.
The beneficiaries of the trust will elect three out of the five trustees of
the General Staff Trust.
Barloworld currently has approximately 11 000 employees who will become
beneficiaries of this trust.
3.2 The resultant structure
Please refer to the announcement in the press to be released on Friday, 13
June 2008 for a diagram of the resultant structure.
4. Mechanics of the black ownership initiative
The black ownership initiative will be implemented through a specific issue
for cash by Barloworld of 21.7 million ordinary par value shares of R0,05
each in the share capital of Barloworld ("Barloworld ordinary shares") as
set out below.
4.1 The CSGs and the SBPs
The funding for the SBPs and the CSGs is fully underwritten by The Standard
Bank of South Africa Limited.
Funding SPVs have been established for each of the SBPs and the CSGs to
subscribe for their Barloworld ordinary shares and to advance the Barloworld
Loans referred to below ("Funding SPVs"). The shares in each Funding SPV
will be held by another ring-fenced entity ("Shareholding SPV"). The
Shareholding SPVs will be special purpose companies set up specifically for
the purposes of the black ownership initiative, save that the Shareholding
SPV for Gandaganda will be a trust.
Ayavuna will hold the entire issued ordinary share capital of one of the
Shareholding SPVs ("the Ayavuna Shareholding SPV"), and the Ayavuna
Shareholding SPV will, in turn, hold all of the ordinary shares in one of
the Funding SPVs.
Zwavhudi and each of the CSGs will, like Ayavuna, hold all the ordinary
shares in the Shareholding SPVs, which in turn, will hold all the ordinary
shares in the Funding SPVs.
The YJ Family Trusts will hold the entire issued ordinary share capital of
one of the Shareholding SPVs ("the YJ Family Trusts Shareholding SPV") in
equal proportions and the YJ Family Trusts Shareholding SPV will, in turn,
hold all the ordinary shares in one of the Funding SPVs. Each of Gandaganda,
Moty and Izingwe has been specifically created for the black ownership
initiative as a ring-fenced Shareholding SPV and will directly hold the
entire issued ordinary share capital of a Funding SPV for it.
The Funding SPVs for DEC, Ikamva Labantu and Shalamuka will be allotted and
issued with 0.32% of Barloworld`s increased share capital each.
The Funding SPVs for the YJ Family Trusts and Zwavhudi will be allotted and
issued with 0.67% and 0.44% of Barloworld`s increased share capital,
respectively.
The Funding SPVs for Izingwe and Moty will be allotted and issued with 0.75%
of Barloworld`s increased share capital each.
The Funding SPVs for Ayavuna and Gandaganda will be allotted and issued with
1.50% and 1.33% of Barloworld`s increased share capital, respectively.
Each Funding SPV will subscribe for Barloworld ordinary shares as set out
below:
- Each Funding SPV will initially subscribe for Barloworld ordinary
shares ("the initial subscription shares") at the par value of those
shares. The initial subscription shares will have full voting and
economic rights.
- Barloworld will in certain circumstances, but in any event after a
seven year period ("ordinary course period"), subject to the rights of
the funders contemplated below, repurchase all of the initial
subscription shares from the Funding SPV at their par value.
- Each Funding SPV will in certain circumstances, but in any event after
the expiry of the ordinary course period ("the subscription date"), be
obliged to subscribe for a stipulated number of Barloworld ordinary
shares at a predetermined subscription price of R217.24 per Barloworld
ordinary share. ("the maturity subscription shares").
The SBPs and CSGs will collectively procure an equity contribution of R44.9
million into their respective Funding SPVs, which will be used in part to
settle the subscription price of the initial subscription shares whilst the
balance will be used to advance a loan to Barloworld as described below.
The Funding SPVs have entered into loan agreements for the raising of an
aggregate of R1 469 million, comprised of seven year senior amortising loans
of R1 062 million in aggregate and seven year subordinated loans of R407
million in aggregate. The Funding SPVs will in turn use proceeds of these
loans and the equity contribution (net of costs) to advance seven year fixed
interest rate bullet loans of R1 504 million to Barloworld (the "Barloworld
Loans").
At the end of the ordinary course period referred to above, the senior
amortising loans will have been partially amortised, and each Funding SPV
will be able to repay its obligations.
Any balance from the repayment of the Barloworld Loans following settlement
by a Funding SPV of its funding obligations will be used to subscribe for
the maturity date subscription shares in Barloworld (as mentioned above) on
the subscription date. The Funding SPV will be required to raise its own
funding to finance the balance needed for that subscription. If it is not
able to raise the finance to subscribe for the Barloworld ordinary shares,
the subscription date will be extended by a maximum of one year following
the ordinary course period.
Prior to 31 December 2014, save with the prior written consent of Barloworld
and save for any encumbrances permitted by the funding arrangements, the
SBPs and CSGs will be unable to encumber or sell the shares they hold in
their respective Shareholding SPVs, the Shareholding SPVs will be unable to
encumber or sell the shares they hold in their respective Funding SPVs, and
the Funding SPVs will be unable to encumber or sell the shares they hold in
Barloworld. Between 31 December 2014 and 31 December 2017, save with the
prior written consent of Barloworld or the relevant funders, the SBPs, CSGs,
Shareholding SPVs and Funding SPVs will not be entitled to encumber their
shares in the Shareholding SPVs, Funding SPVs and Barloworld, respectively,
but will, subject to restrictions imposed by the funding arrangements and a
pre-emptive right in Barloworld`s favour, be entitled to sell the shares
held in the Shareholding SPVs, Funding SPVs and Barloworld, respectively;
provided that, if Barloworld does not exercise its pre-emptive right, the
shares are sold to a third party that makes at least an equivalent
contribution to the empowerment credentials of Barloworld.
4.2 The Black Managers Trust
Barloworld will make a contribution to the Black Managers Trust to enable it
to subscribe, at par, for 1.35% of Barloworld`s increased share capital.
As a pre-condition to the issue of the Barloworld ordinary shares, the trust
will not be entitled to any dividends or any other distributions on the
shares held by the trust during a seven year period from the date on which
the trust subscribes for the shares in Barloworld ("the BMT subscription
date"). At the end of that seven year period ("the Maturity Date"),
Barloworld will be entitled to repurchase, at par, a number of Barloworld
ordinary shares from the trust determined as follows: the number of shares
will be equal to the market value (at the BMT subscription date) of the
Barloworld ordinary shares subscribed for by the trust on the BMT
subscription date less the par value paid for them, adjusted by a factor of
12.34% per annum, less an amount equal to the dividends and any other
distributions which would have been paid on the shares over the seven year
period had the trust been entitled to receive them. The resultant number
should be divided by the Maturity Date market value of one Barloworld
ordinary share in order to determine the number of Barloworld ordinary
shares to be repurchased from the trust.
Each beneficiary of the Black Managers Trust will receive a vested right to
a certain number of Barloworld ordinary shares determined with reference to
occupational level and cost to company at inception. The beneficiaries will
need to remain in the employ of the Barloworld Group for a period of three,
four and five years, respectively, from the date on which the Barloworld
ordinary shares are allocated by the trust to the relevant beneficiaries
("the BMT allocation date"), in respect of one third, two thirds and all of
the shares vested in them respectively, failing which the shares vested in
them may be forfeited. The beneficiaries` voting rights in respect of the
shares which are vested in them will be exercisable with effect from the BMT
allocation date.
If the employment of a beneficiary is terminated for reasons of early
retirement, dismissal or retrenchment prior to the five year period referred
to above, he will forfeit his vested rights. In the event that the
employment of a beneficiary is terminated for reasons of retirement at
retirement age, death, disability or the sale of the business in which he is
employed, he shall be deemed to have remained in the employ of Barloworld
and shall not forfeit his vested shares. A beneficiary shall be entitled to
receive all of the shares that are vested in him, less the shares
repurchased by Barloworld at the Maturity Date, provided that the employment
service requirements have been met. The beneficiaries will not be entitled
to sell or encumber any of the shares vested in them until after the shares
have been distributed to them.
4.3 The Black Non-Executive Directors Trust
Barloworld will make a capital contribution to the Black Non-Executive
Directors Trust to enable it to subscribe for 0.04% of Barloworld`s
increased share capital at a subscription price determined with reference to
the VWAP of an ordinary share in the share capital of Barloworld calculated
for the 30 trading days ending at the close of business on the price
calculation date.
Each beneficiary of the trust will receive vested rights to the Barloworld
ordinary shares allocated to him from the date on which the Barloworld
ordinary shares are allocated by the trust to him ("the BET allocation
date"). The beneficiaries will need to remain on the Board for a period of
three, four and five years from the BET allocation date, in respect of one
third, two thirds and all of the shares vested in them, respectively,
failing which the shares vested in them will be forfeited. The beneficiaries
will be entitled to exercise the voting rights in respect of the shares
allocated to them from the BET allocation date, and will receive the
dividends paid in respect of those shares.
A beneficiary will be entitled to receive all the shares vested in him
provided that the Board tenure requirements have been met. The beneficiaries
will not be entitled to sell or dispose of any of the shares vested in them
until after the shares have been distributed to them.
Any shares in the trust remaining after the relevant non-executive director
has ceased to be a beneficiary of the trust or after the transfer of shares
to the beneficiaries who remain in the trust, will be transferred to the
Education Trust.
4.4 The Education Trust
Barloworld will make a capital contribution to the Education Trust to enable
it to subscribe at par for 0.78% of Barloworld`s increased share capital.
As a pre-condition to the issue of the Barloworld ordinary shares, the
Education Trust will only be entitled to receive 25% of any of the dividends
declared and other distributions made on the Barloworld ordinary shares held
by the Education Trust during the first year after the date on which the
Education Trust subscribes for the Barloworld ordinary shares ("the ET
subscription date"), and 50% of any dividends declared and distributions
made on the shares held by the Education Trust in each year thereafter. At
the end of the Maturity Date, Barloworld will be entitled to repurchase, at
par, such number of shares from the Education Trust as is determined in
accordance with the formula set out in paragraph 4.2, save that the
reference to `BMT subscription date` shall be read as reference to `the ET
subscription date`.
A sub-committee of the Board will determine on an annual basis what
constitutes a "qualifying need" for purposes of the trust and the trustees
will determine the beneficiaries for each financial year, provided that 85%
of the income of the trust accrues to black people.
This trust is intended to be a long-term trust. The Barloworld ordinary
shares held by the Education Trust will not vest in the beneficiaries of the
trust but will be held in trust for their benefit. At the Maturity Date,
after Barloworld has repurchased the shares which it is entitled to, the
remaining Barloworld ordinary shares held by the Education Trust will
continue to be held in trust or will be transferred to a trust with similar
objectives to the Education Trust, including being for the benefit of black
people.
4.5 The General Staff Trust
Each company in the Barloworld Group which has South African employees will
make a capital contribution to the General Staff Trust to enable the General
Staff Trust to subscribe for 1.00% of Barloworld`s increased share capital
at the same subscription price per share as the price per share at which the
Black Non-Executive Directors Trust subscribed for its shares.
Each beneficiary of the General Staff Trust will be granted a certain number
of Barloworld ordinary shares determined with reference to his length of
service with the Barloworld Group. It is proposed that employees should be
required to remain in the employ of the Barloworld Group for specified
periods in order to avoid forfeiture of their shares. Beneficiaries will be
entitled to voting rights in respect of the number of Barloworld ordinary
shares granted to each of them. In addition, it is proposed that
beneficiaries be entitled to dividends on the shares in respect of which
they have met the employment service requirements. The final terms of the
General Staff Trust in relation to the shares to be allocated to each
employee will be formulated taking into account the proposed amendments to
section 8B of the Income Tax Act, 1962.
5. Use of funds received
A large portion of Barloworld`s existing borrowings are short-term in
nature. Barloworld intends using the proceeds from the Barloworld Loans to
repay a portion of its existing short-term borrowings and thereby
restructure its funding into longer-term funding.
6. Consultations regarding black ownership initiative
In developing the black ownership initiative, Barloworld consulted with the
DTI.
7. Economic cost
Barloworld has estimated the economic cost, based on current market
conditions, of the black ownership initiative for the duration of the
transaction to be approximately R682 million (of which R428 million will be
recognised in profit or loss in the first six months), calculated in
accordance with International Financial Reporting Standards in respect of
share based payments. This translates into approximately 3.2% of the market
capitalisation of Barloworld calculated with reference to the closing 30-day
VWAP Barloworld ordinary share price of R103.87 per share on Friday, 6 June
2008.
8. Empowerment level in terms of the Codes
Empowerdex, one of South Africa`s foremost empowerment status verification
agencies, has conducted an initial scoring of the black ownership initiative
in accordance with Code 100 of the Codes. It is estimated that, after its
implementation, the black ownership initiative will translate into an
effective 29% black ownership of Barloworld if mandated investments and
foreign operations, as defined in the Codes, are excluded from Barloworld`s
existing shareholding structure.
9. Conditions precedent
The black ownership initiative is subject, inter alia, to the fulfillment of
the following suspensive conditions:
9.1 all requisite shareholder approvals being obtained, among other things,
for:
- authority to the directors of Barloworld to allot and issue Barloworld
ordinary shares in terms of the black ownership initiative (including
the compulsory subscription);
- sanctioning the terms of any financial assistance given by Barloworld
in terms of the black ownership initiative;
- approving the specific repurchase by Barloworld of the Barloworld
ordinary shares outlined in paragraphs 4.1, 4.2 and 4.4 above;
9.2 all regulatory approvals being obtained; and
9.3 the conditions to which the loan agreements referred to in paragraph 4.1
above being fulfilled or waived.
10. Pro forma financial effects
The pro forma financial effects set out below have been prepared to assist
Barloworld ordinary shareholders to assess the impact of the black ownership
initiative on the earnings ("EPS"), headline earnings ("HEPS"), net asset
value ("NAV") and tangible NAV ("TNAV") per Barloworld ordinary share. The
material assumptions are set out in the notes following the table. These pro
forma financial effects have been disclosed in terms of the JSE Limited
("JSE") Listings Requirements and do not constitute a representation of the
future financial position of Barloworld on implementation of the black
ownership initiative. The pro forma financial effects are the responsibility
of the Board and are provided for illustrative purposes only.
Before the After the Percentage
implementation of the implementation of change
black ownership the black
initiative ownership
initiative
(cents) (cents)
EPS 506.4 283.4 (44.0)
HEPS 370.2 147.8 (60.1)
NAV per share 6 584 6 547 (0.6)
TNAV per share 5 391 5 358 (0.6)
Notes:
1 The EPS, HEPS, NAV per Barloworld ordinary share and TNAV per
Barloworld ordinary share "Before the implementation of the black
ownership initiative" are based on the interim results for the six
months ended 31 March 2008.
2 The EPS and HEPS "After the implementation of the black ownership
initiative" are based on the assumption that the black ownership
initiative was implemented on 1 October 2007 and include the following:
- An IFRS2 charge of R428 million based on the Barloworld closing share
price on 6 June 2008 of R94.50 and the 30-day VWAP up to that date of
R103.87.
- Additional interest of R10 million incurred on replacing existing
funding at an average rate of 10.4% per annum with the funding from the
black ownership initiative at a rate of 12.91% per annum.
- Transaction costs recognised in profit or loss amounting to R12 million
associated with the implementation of the black ownership initiative.
- Charges amounting to R29 million, representing the payment of dividends
to the SBPs and the CSGs in respect of the 2007 final dividend of 200
cents per Barloworld ordinary share.
3 The NAV per Barloworld ordinary share and TNAV per Barloworld ordinary
share "After the implementation of the black ownership initiative" are
based on the assumption that the black ownership initiative was
implemented on 31 March 2008.
4 The EPS and HEPS "After the implementation of the black ownership
initiative" are based on 204 983 329 weighted average Barloworld
ordinary shares in issue (204 190 329 weighted average Barloworld
ordinary shares in issue as per the interim results plus 793 000
Barloworld ordinary shares issued in the first year to the participants
of the General Staff Trust).
5 The NAV per Barloworld ordinary share and TNAV per Barloworld ordinary
share "After the implementation of the black ownership initiative" are
based on 205 353 750 Barloworld ordinary shares in issue (204 560 750
Barloworld ordinary shares in issue as per the interim results plus 793
000 Barloworld ordinary shares issued in the first year to the
participants of the General Staff Trust).
11. Important dates and times
The salient dates and times in respect of the black ownership initiative are
set out below:
2008
Circular and notice of general meeting posted to Monday, 21 July
shareholders on or about
Last day for receipt of proxies in respect of Friday, 8 August
the general meeting by 10:30 on
General meeting of shareholders at 10:30 on Tuesday, 12 August
Results of general meeting released on SENS on Tuesday, 12 August
Results of general meeting published in the Wednesday,13 August
press on
Special resolutions lodged with the Registrar of Wednesday,13 August
Companies on or about
Expected listing date of the new Barloworld Monday, 25 August
ordinary shares on the JSE on
Effective date of black ownership initiative on Monday,25 August
or about
Notes:
1 The abovementioned times and dates are South African times and dates,
and are subject to change. Any such change will be published on SENS
and in the press.
12. Opinions and recommendations
Barloworld has structured the black ownership initiative to ensure it meets
the objectives of its BBBEE strategy and the Codes. The Board is mindful of
the fact that a failure by Barloworld to implement its BBBEE strategy will
have negative consequences for the business of Barloworld.
Taking the above factors into account, the Board is of the opinion that the
terms and conditions of the black ownership initiative will be to the long-
term benefit of Barloworld`s shareholders. Accordingly, the Board recommends
that Barloworld shareholders vote in favour of the resolutions to be
proposed at the general meeting. In respect of their personal holdings in
the share capital of Barloworld, the Board members intend to vote in favour
of the resolutions to be proposed at the general meeting.
Hixonia Nyasulu, Dumisa Ntsebeza, Selby Baqwa and Bongi Makhabela have
recused themselves of the decision-making process of the Board due to their
interests in the transaction.
13. Documentation
A circular setting out the full details of the black ownership initiative,
and the general meeting required to implement it, will be posted to
Barloworld shareholders on or about Monday, 21 July 2008.
Sandton
12 June 2008
Investment bank and transaction sponsor
Standard Bank
Attorneys
Bowman Gilfillan
Reporting accountants and auditors
Deloitte & Touche
Empowerment adviser
Empowerdex
Sponsor
JP Morgan
Date: 12/06/2008 07:30:02 Produced by the JSE SENS Department.
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