| Tue 8 Dec 2009, 9:00 | | SAB - SABMiller Announces The Detailed Terms Of Its Proposed Broad-Based |
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SAB
SOSAB
SAB - SABMiller Announces The Detailed Terms Of Its Proposed Broad-Based
Black Economic Empowerment Transaction In South Africa
SABMiller Plc
JSE ALPHA CODE: SAB
ISSUER CODE: SOSAB
ISIN CODE: GB0004835483
8 December 2009
SABMiller announces the detailed terms of its proposed Broad-Based Black
Economic Empowerment transaction in South Africa
SABMiller today announces the detailed terms of its proposed broad-based
black economic empowerment transaction in South Africa, preliminary details
of which were first announced on 1 July 2009. The transaction will result in
8.45% of its South African subsidiary, The South African Breweries Limited,
being held by a broad base of black participants, reflecting the group`s long-
standing and continuing commitment to socio-economic progress in South
African society. Participants will include SAB`s employees; black-owned
licensed liquor retailers and retail liquor licence applicants, as well as
registered black-owned customers of ABI, the soft drinks division of SAB
("Retailers"); and the broader South African community through a newly
established SAB Foundation.
The total value of the transaction is US$988 million (R7.3 billion) based on
a R/US$ exchange rate of 7.39.
Under the transaction, The South African Breweries Limited ("SAB") will issue
three new classes of ordinary shares in SAB (the "SAB Shares"), in aggregate
comprising 8.45% of SAB`s enlarged issued share capital, to three separate
investment entities, which will hold the interests of the participants as
follows:
- SAB`s employees will in aggregate hold 18,532,491 E Ordinary Shares,
being 3.39% of SAB`s enlarged issued share capital, through an employee
share trust ("The SAB Zenzele Employee Trust");
- Retailers will in aggregate hold 19,228,250 R Ordinary Shares, being
3.52% of SAB`s enlarged issued share capital, through an investment
entity, SAB Zenzele Holdings Limited ("SAB Zenzele"); and
- The SAB Foundation will hold 8,412,359 F Ordinary Shares, being 1.54% of
SAB`s enlarged issued share capital.
The transaction period is expected to be approximately ten years
("Transaction Term"), after which time the E and F Ordinary Shares, and the
ordinary shares in SAB Zenzele will be acquired by members of the SABMiller
Group, and participants will receive shares in SABMiller plc which, broadly,
will have an aggregate value linked, inter alia, to the operating performance
of SAB during the Transaction Term.
The transaction will not require any external bank funding, and meaningful
cash dividends are expected to be paid to participants from the first year.
By way of example, had the transaction been implemented on 1 April 2008, the
aggregate amount of dividends payable to holders of the SAB Shares would have
been approximately R77 million in respect of the SAB financial year ended 31
March 2009. This amount, net of any costs and administration expenses, would
have been distributed to transaction participants. This example should,
however, not be construed as an indication of future financial performance
and is included for illustrative purposes only.
The transaction is subject to the fulfilment of the conditions precedent as
set out later in this announcement.
SAB`s compliance with the South African Government`s Codes of Good Practice
on Broad-Based Black Economic Empowerment (the "Codes") will be materially
enhanced through the transaction. SABMiller believes that the transaction
will support the normalisation of the South African liquor industry by
supporting retail liquor licensing in South Africa, and, by seeking to
promote sustainable economic growth and social development in South Africa,
the transaction will align the interests of the group`s South African
stakeholders with SABMiller`s shareholders, and will maximise long term
shareholder value.
Graham Mackay, Chief Executive of SABMiller plc, said:
"The group`s broad-based black economic empowerment transaction in South
Africa further entrenches SABMiller`s long standing commitment to the country
and its people, while at the same time enhancing the growth and profitability
of the company."
Norman Adami, Managing Director of SAB, said:
"SAB is proud to announce further details of this innovative transaction,
once again demonstrating the company`s determination to set new standards in
societal leadership, make a significant contribution to its black employees
and stakeholders and play its full part in the on-going normalisation and
regulation of the South African liquor industry. The word Zenzele, which
means "do it (for) yourself", epitomises the essence of what this transaction
is all about - the unquenchable desire to achieve personal improvement and
growth".
TRANSACTION RATIONALE
SABMiller believes that broad-based black economic empowerment is a key
requirement for the promotion of sustainable economic growth and social
development in South Africa. Further, the South African government
promulgated the Codes as a means of reducing the effects of entrenched
inequalities and improving the participation of previously disadvantaged
people in effective economic activity, creating regulatory changes that must
be complied with.
In line with SABMiller`s and SAB`s empowerment objectives, the transaction is
therefore designed to increase black participation in SAB by providing long
term economic benefits to a broad range of black South Africans, comprising
employees, Retailers, and the broader South African community.
SABMiller believes that the transaction, through the inclusion of these
participant groups as shareholders, will facilitate the closer alignment of
SAB`s interests with its many stakeholders and compliance with the regulatory
changes. Through the transaction, SAB seeks to support the licensing process
in South Africa and believes that there are considerable socio-economic
benefits to be derived from a normalised and regulated industry in which
liquor retailers, the vast majority of whom are currently unlicensed, are
formally incorporated into the economy and liquor industry.
SAB is also required to demonstrate a commitment to Broad-based Black
Economic Empowerment ("BBBEE") as part of its regulatory commitments and it
has committed to attaining at least Level Four Contributor status on the
basis of the scorecard contained in the Codes by 2012. The Transaction will
make a material contribution towards achieving this objective. Based on
current assumptions, the Transaction will constitute an effective 14.1 %
broad-based black economic empowerment ownership transaction in terms of the
Codes, after adjusting for mandated investments.
SABMiller believes that the proposed transaction is necessary in order to
comply with existing regulatory commitments in South Africa and to provide
SAB the continuing ability to adapt to any future changes in regulatory
requirements. SABMiller believes that it will have a positive impact on
future growth and will enhance its position as a leading corporate citizen in
South Africa.
More details on the Codes and the scorecard process are set out in Note 1 to
this announcement.
TRANSACTION STRUCTURE
Structure
The transaction is to be implemented through the creation of three separate
investment entities being:
- The SAB Zenzele Employee Trust, which will hold SAB Shares for the
benefit of employees;
- SAB Zenzele (a South African registered public company, specifically
incorporated for the purposes of the transaction), which will hold SAB Shares
for the benefit of Retailers; and
The SAB Foundation, which will hold SAB Shares and apply the dividend income
received from those shares for the benefit of the broader South African
community.
Each of these investment entities will subscribe for new separate classes of
ordinary shares in SAB, amounting in aggregate to 8.45% of SAB`s enlarged
issued share capital, equating to a transaction value of US$988 million (R7.3
billion).
The value of SAB, and resultant value of the SAB Shares for the purposes of
the transaction, was calculated using the implied trading enterprise value
("EV") to EBITA multiple of the SABMiller Group. EBITA is defined as
operating profit before exceptional items and amortisation of intangible
assets, excluding software, but including the group`s share of associates`
and joint ventures` operating profit on a similar basis. The EV is based on
the volume weighted average price of R196.38 per SABMiller ordinary share on
the JSE for the 60 trading days ended at the close of trading on 27 November
2009 and the average R/US$ exchange rate of 7.47 over that period. The
consolidated EBITA for SABMiller and SAB were both based on the results of
the 12 months to 30 September 2009.
The respective interests of the three investment entities in SAB, and their
respective participation in the transaction, are set out in the table below:
Number of %Interest Value of Value of
SAB Shares in SAB`s SAB Shares SAB Shares
(Millions) enlarged (US$ million) (Rand
Issued million)
share
capital
SAB Zenzele
Employee
Trust 18.5 3.39 397 2,930
SAB Zenzele 19.2 3.52 411 3,040
SAB Foundation 8.4 1.54 180 1,330
TOTAL 46.1 8.45 988 7,300
Participants will, from inception, have voting and economic rights in SAB
through their respective investment entities` interests in SAB. Cash
dividends are expected to be paid to all participants on their indirect
holding of SAB Shares from the first year.
Participating Retailers will be required to make a relatively small cash
investment as part of the subscription for their shares in SAB Zenzele. This
cash investment will be based on a sliding scale relative to the value of the
allocation subscribed for, as more fully described below. Employees and The
SAB Foundation will not be required to make any cash investment toward their
respective participations.
Benefits delivered to participants and mechanics of the transaction
Participants, through their respective investment entities, can expect to
receive economic benefits in two forms:
- a regular dividend on their indirect holdings of SAB Shares from the
first year; and
- receipt of SABMiller shares at the end of the Transaction Term in
exchange for their SAB Shares (or in the case of Retailers, in exchange for
their SAB Zenzele shares).
The dividend on SAB Shares is expected to be paid bi-annually, and the amount
of the dividend, although dependent on SAB`s operational performance and
capital requirements, is expected to be meaningful. If SAB declares and pays
a dividend in respect of any six month period ending 31 March or 30 September
during the Transaction Term, each SAB Share will have the right to receive a
dividend equal to 25% of SAB`s adjusted attributable profit for that period,
divided by the number of all the issued ordinary shares in the share capital
of SAB (including the SAB Shares). By way of example, had the transaction
been implemented on 1 April 2008, the aggregate amount of dividends payable
to holders of the SAB Shares would have been approximately R77 million in
respect of the SAB financial year ended 31 March 2009. This amount, net of
any costs and administration expenses, would have been distributed to
transaction participants. This example should, however, not be construed as
an indication of future financial performance and is included for
illustrative purposes only.
At the end of the Transaction Term, a portion of the SAB Shares will be
repurchased by SAB for an amount equal to the par value per share as at the
subscription date (which equals R0.000 001) and the remaining SAB Shares and
all of the SAB Zenzele ordinary shares will be compulsorily acquired by
SABMiller (or a member of the SABMiller Group nominated by SABMiller) in
exchange for the issue of SABMiller shares.
The value of the SABMiller shares received will be calculated by taking into
account the difference between:
the initial value of the SAB Shares, net of any cash investment received,
escalated at an interest rate equal to 85% of the South African prime
interest rate during the Transaction Term, and offsetting against that
escalated value the difference between the dividends which would have been
paid on SAB ordinary shares, had SAB pursued a 100% dividend policy during
the Transaction Term (escalated at the same rate), and the actual dividends
paid on the SAB Shares; and
the actual value of the SAB Shares at the end of the Transaction Term, as
determined using the same valuation methodology as that used to determine the
value of the SAB Shares issued at the beginning of the Transaction Term.
The benefits to participants at the end of the Transaction Term will,
therefore, reflect the performance of SAB in South Africa over the
Transaction Term.
The SABMiller shares issued at the end of the Transaction Term to The SAB
Zenzele Employee Trust will then be distributed to participating employees,
and those issued in exchange for the ordinary shares in SAB Zenzele will be
issued directly to participating Retailers. It is envisaged that The SAB
Foundation will retain into perpetuity the SABMiller shares issued to it.
The net effect will be that at the end of the Transaction Term, SAB will
again be a wholly-owned subsidiary of SABMiller and the transaction
participants will hold shares directly in SABMiller, which shares will be
freely tradable on the JSE.
IMPACT ON SABMILLER
The transaction value is calculated as US$988 million (R7.3 billion) based on
a R/US$ exchange rate of 7.39. However, the economic cost of the transaction
to the SABMiller group (based on SABMiller`s current assumptions and on
market conditions as at Friday, 27 November 2009 and applying the option
valuation methodology that is common practice for transactions of this
nature) is calculated at approximately US$279 million (R2.1 billion). This
same option pricing methodology is used to value the IFRS 2 expense as
described below.
The transaction is expected to become effective in the financial year
beginning on 1 April 2010, and as such will not impact the SABMiller group`s
adjusted earnings for the current financial year. Under International
Financial Reporting Standard 2 or IFRS 2, the transaction will result in a
share-based payment expense being reflected in the income statement of
SABMiller over the Transaction Term, with the majority of this expense being
charged in the financial year ending 31 March 2011. This non-cash expense,
and the cash transaction costs, will be excluded for the purposes of
calculating adjusted earnings.
More details on the calculation of the share-based payment expense and its
accounting treatment are set out in Note 2 to this announcement.
Pro forma financial effects
The following unaudited pro forma financial information of the SABMiller
group is based on the historical consolidated income statement of SABMiller
for the six months ended 30 September 2009, and has been prepared to show the
effect of the Transaction, as if the Transaction had occurred on 1 April
2009.
The unaudited pro forma financial information has been prepared for
illustrative purposes only and because of its nature, addresses a
hypothetical situation, and therefore does not represent the group`s actual
financial position or results.
SABMiller Notes Pro Forma
6 months ended
30 September adjusted
2009
US cents US cents
Basic earning per share 63.0 1 54.1
Adjusted earnings per
Share 80.0 2 79.7
Notes to the unaudited pro forma financial information
1. The pro forma adjustments comprise:
a) An adjustment to debit net operating expenses in the income statement
relating to the IFRS 2 Share based payments charge in relation to the
Employee and Retailer offers, amounting to US$123 million.
Assuming the weighted average R/US$ exchange rate for the six months
ended 30 September 2009 of R8,12:US$1 the total share-based payment
charge for the Transaction amounts to US$208 million for the full
Transaction Term.
- The share-based payment charge associated with the Employee offer
amounts to US$103 million for the full Transaction Term and will be
expensed in the income statement over the Transaction Term. The charge
for the six months ended 30 September 2009 amounts to US$18 million. It
is assumed that approximately 34% of the share-based payment charge
relating to the Employee offer will be expensed in the first year, with
the remaining 66% being expensed over the remainder of the transaction
period. Not all of the share-based payment charge is incurred in year 1
due to the fact that certain service conditions are attached to the
employee allocations, whereby employees forfeit their effective
entitlement to the E Ordinary shares, according to a predetermined
forfeiture profile, should they leave the employ of the SABMiller group
under certain conditions. Effective rights to forfeited shares are then
reallocated at SAB`s discretion.
- A once-off share-based payment charge of US$105 million attributable
to the participation of the Retailers.
- There is no share-based payment charge associated with the shares
issued to The SAB Foundation.
The charge to the income statement is assumed to be exceptional.
b) An adjustment to debit donation expenses in the income statement
relating to dividends paid to The SAB Foundation of US$1 million,
assuming the weighted average R/US$ exchange rate for the six months
ended 30 September 2009 of R8.12:US$1, based on these dividends having
been distributed in the form of donations to social investment
beneficiaries, (assuming all dividends received by the SAB Foundation
are paid out in the same period). The associated STC charge on the
dividends is US$nil. This adjustment will have a continuing impact.
c) An adjustment to debit net operating expenses in the income statement
to reflect the estimated one-off costs of the transaction of US$14
million and the associated credit to the taxation charge in the income
statement of US$4 million, assuming the South African statutory tax rate
of 28% and a weighted average exchange rate for the six months ended 30
September 2009 of R8.12:US$1.
Pro forma basic earnings per share has been calculated by dividing pro
forma profit attributable to equity shareholders of US$839 million less
an adjustment of US$3 million for SAB dividends paid to SAB Zenzele and
to The SAB Zenzele Employee Trust (assuming the dividends paid to SAB
Zenzele and to The SAB Zenzele Employee Trust are equivalent to 25% of
the adjusted attributable profits of SAB divided by the total number of
SAB ordinary shares, including the SAB Shares) and the weighted average
exchange rate for the six months ended 30 September 2009 of R8.12:US$1,
by 1,545 million shares, being the SABMiller weighted average number of
shares in issue for the six months ended 30 September 2009. The
associated STC charge on those dividends is US$nil. The dividend
adjustment will have a continuing impact.
2. Pro forma adjusted earnings per share has been calculated by dividing
pro forma adjusted earnings by 1,545 million shares, being the SABMiller
weighted average number of shares in issue for the six months ended 30
September 2009. Pro forma adjusted earnings are the sum of adjusted
earnings of US$1,236 million less an adjustment of US$3 million for SAB
dividends assumed to be paid to SAB Zenzele and to The SAB Zenzele
Employee Trust as described above, less an adjustment of US$1 million to
reflect the non-exceptional income statement costs associated with the
transaction as detailed in note 1(b) above. The dividend adjustment will
have a continuing impact.
BBBEE PARTICIPANTS
Employee offer
Rationale
The inclusion of employees in the transaction is intended to create broad-
based ownership in SAB and to spread a significant portion of the benefits of
the transaction among SAB`s employees. The sustainability and growth
prospects of SAB will be enhanced by improving SAB`s ability to attract and
retain employees, aligning the interests of employees and shareholders.
Mechanics
The Employee offer will include all permanent employees of SAB and its
subsidiaries and of the SABMiller Group who are black, as defined in the
Codes, and are permanently resident in South Africa. It will also include
those permanent employees who are not black for the purpose of the Codes but
who are not normally eligible for participation in the SABMiller Group share
incentive plans and are permanently resident in South Africa ("Employees").
The Employee offer will result in 18.5 million E Ordinary Shares being issued
to The SAB Zenzele Employee Trust, equating to 3.39% of the ordinary issued
share capital of SAB. Employees will not be required to invest any cash.
Subject to SAB declaring a dividend in respect of the relevant six month
period, participating Employees will receive dividends twice a year. The
amount of the dividends that are expected to be paid to participants,
although dependent on SAB`s operational performance and capital requirements,
are expected to be meaningful. By way of example, had the transaction been
implemented on 1 April 2008, the aggregate amount of dividends payable to The
SAB Zenzele Employee Trust would have been approximately R31 million in
respect of the SAB financial year ended 31 March 2009. This amount, net of
any costs and administration expenses, would have been distributed to
transaction participants. This example should, however, not be construed as
an indication of future financial performance and is included for
illustrative purposes only.
Participating Employees will be allocated participation rights within The SAB
Zenzele Employee Trust that will entitle them to an equal number of E
Ordinary Shares held by The SAB Zenzele Employee Trust on their behalf. 13%
of the participation rights in The SAB Zenzele Employee Trust will be
reserved to cater for qualifying Employees who join SAB during the
Transaction Term. Participation rights will vest on day one, subject to the
forfeiture events detailed below, and will not be transferable in any way for
the duration of the Transaction Term.
Allocation and Forfeiture Events
An allocation committee will determine the extent of the participation rights
to be allocated to Employees, both current and future. Allocations to
Employees will be determined on the basis of their annual remuneration as at
the allocation date, with employees who are not normally eligible for
participation in the SABMiller group share incentive plans ("General Staff")
being entitled to further participation rights based on years of service to
the SABMiller group. In terms of allocation of value of participation rights,
each Employee will receive a common multiple related to annual remuneration,
with an increase of up to 25% for employees categorised as General Staff
relating to years of service.
Employees who resign, are retrenched or retire may forfeit some or all of
their participation rights in accordance with an established forfeiture
profile contained in the trust deed. Employees who are dismissed for good
cause will forfeit all of their participation rights. Any participation
rights forfeited by Employees will be re-allocated by the trustees in a
manner determined by the allocation committee, to new and existing Employees.
Governance
The SAB Zenzele Employee Trust will hold the interests of participating
Employees in the SAB Shares over the Transaction Term, and will be governed
by the trust deed of The SAB Zenzele Employee Trust. The participating
Employees will, from inception, have voting rights, which will be exercised
on their behalf and at their direction by the trustees of The SAB Zenzele
Employee Trust. There will be a total of eight trustees of The SAB Zenzele
Employee Trust, a majority of whom will be black, and will comprise:
- three trustees, who will be employees of the SABMiller group, and will
be appointed by the Board of Directors of SAB;
- two trustees, who will be participating Employees, and will be appointed
through a process facilitated by trade unions recognised by SAB; and
- two trustees, who will be participating Employees, and will be elected
by the Employees directly; and
- one independent trustee, who will neither be employed within the
SABMiller group nor a member or official of a trade union recognised by
SAB.
The chairperson of the trustees, who will be a participating Employee elected
by the trustees, will have a casting vote in the event of a deadlock.
Retailer offer
Rationale
SAB believes that participation by black retailers and retail liquor licence
applicants will create genuine broad-based empowerment, by improving the
social well-being and sustainability of retailers, and in supporting the
normalisation and regulation of the South African liquor industry. SABMiller
believes that the transaction, through the inclusion of these participant
groups as shareholders, will facilitate the closer alignment of SAB`s
interests with its many stakeholders.
Mechanics
The following Retailer categories will be eligible to participate in the
transaction:
- black individuals or groups who are liquor retailers with a valid retail
liquor licence, including temporary liquor permits issued in the Gauteng
province of South Africa;
- black individuals or groups who can provide evidence that a retail
liquor licence application has been lodged or is materially complete in
respect of those application requirements that are within the
applicant`s control; and
- black individuals or groups who are registered customers of ABI.
Participants will be required to be a qualifying black person or a greater
than 51% black-owned entity, as defined in terms of the Codes, in order to
participate in the offer.
The transaction will result in 19.2 million R Ordinary Shares being issued to
SAB Zenzele, equating to 3.52% of the ordinary issued share capital of SAB.
Participating Retailers will be required to make an affordable cash
investment towards their subscription for shares in SAB Zenzele (as more
fully described below). Subject to SAB declaring a dividend in respect of the
relevant six month period, participating Retailers will receive dividends
twice a year through their shareholding in SAB Zenzele and the size of the
dividends that are likely to be paid to participants bi-annually, although
dependent on SAB`s operational performance and capital requirements, is
expected to be meaningful. By way of example, had the transaction been
implemented on 1 April 2008, the aggregate amount of dividends payable to SAB
Zenzele would have been approximately R32 million in respect of the SAB
financial year ended 31 March 2009. This amount, net of any costs and
administration expenses, would have been distributed to transaction
participants. Assuming administration expenses of R5 million had been
incurred by SAB Zenzele for the year ended 31 March 2009 and that the
Retailer offer was fully subscribed, Retailers with a base allocation of
R50,000 would have received dividends of R444, and Retailers with a maximum
allocation of R500,000 would have received dividends of R4,440. This example
should, however, not be construed as an indication of future financial
performance and is included for illustrative purposes only.
SAB Zenzele will hold the interests of participating Retailers in SAB Shares,
for the Transaction Term.
Retailers will be able to apply for a base allocation of SAB Zenzele shares,
which will have a value of R50,000, by making a minimum cash investment of
R100 (US$14). In addition, Retailers will be able to apply for additional
SAB Zenzele shares as follows:
- Retail liquor licence holders can apply for an allocation of SAB Zenzele
Shares up to a maximum value of R500,000 for a cash investment of
R25,000 or any of the other specific allocation values for the
corresponding cash investments set out in the table below.
- Retail liquor licence applicants can apply for either:
an allocation of SAB Zenzele Shares having a value of R50,000 for a cash
investment of R100; or
an allocation of SAB Zenzele Shares having a value of R100,000, for a
cash investment of R2,500.
- ABI retailers can apply for an allocation of SAB Zenzele Shares up to
maximum value of R250,000 for a cash investment of R10,000 or any of the
other specific allocation values for the corresponding cash investments
set out in the table below.
The subscription prices and the value of the SAB Zenzele Shares are detailed
in the table below:
Number of Subscription Value of Excess of Percentage
SAB Zenzele price (Rand) SAB Zenzele initial of initial
Shares Shares value value in
issued over excess of
(Rand) subscription subscription
Price
317 100 50,000 49,900 99.8%
634 2,500 100,000 97,500 97.5%
951 5,000 150,000 145,000 96.7%
1,268 7,500 200,000 192,500 96.3%
1,585 10,000 250,000 240,000 96.0%
1,902 12,500 300,000 287,500 95.8%
2,219 15,000 350,000 335,000 95.7%
2,536 17,500 400,000 382,500 95.6%
2,853 20,000 450,000 430,000 95.6%
3,170 25,000 500,000 475,000 95.0%
In the case of over-subscription of the Retailer offer, SAB will, in its sole
discretion, decide how to allocate the SAB Zenzele shares, while ensuring
that the SAB Zenzele offer is as broad-based as possible and that there is an
appropriate spread across the Retailer categories.
Bonus Shares
In addition to the above, retail liquor licence applicants who obtain a valid
retail liquor licence within three years from the allocation date of SAB
Zenzele shares, may be entitled to additional (bonus) SAB Zenzele shares at
no additional cost to them, out of a pool of SAB Zenzele shares set aside for
this purpose.
Prior to the issue of additional SAB Zenzele shares, the dividends paid by
SAB Zenzele will be split between the Retailer shareholders and The SAB
Foundation, as the holder of a special share in SAB Zenzele. The entitlement
of The SAB Foundation to SAB Zenzele dividends will be pro rata to the
proportion of the share capital of SAB Zenzele that has been authorised, but
not yet issued. In addition, The SAB Foundation, as the holder of a special
share in SAB Zenzele, will be entitled to dividends and the economic benefit
of any SAB Zenzele authorised shares not subscribed for by applicants in
terms of this SAB Zenzele offer and of any SAB Zenzele shares that may have
been forfeited during the transaction term (see below for details on
forfeiture).
The economic benefits accruing to The SAB Foundation as the holder of the
special share in SAB Zenzele will therefore diminish over time as additional
shares are allocated to licence applicants as they become licensed.
Forfeiture Events
Participating Retailers will forfeit their entire interest in SAB Zenzele if
they fail to remain a minimum 51% black-owned entity as defined by the Codes.
Retailer participants who become permanently disabled or deceased will not
forfeit their shares in SAB Zenzele. Should any black group be placed under
liquidation or should a black individual be placed under sequestration, SAB
Zenzele will allow the transfer of that black group`s or black individual`s
SAB Zenzele shares to a qualifying black person.
The ordinary shares in SAB Zenzele held by participating Retailers will not
be transferable in any way for the duration of the Transaction Term.
Governance
Initially, the SAB Zenzele board of directors will consist of five directors
who will be nominated by SAB.
In due course and at each subsequent annual general meeting, the board of
directors will be reconstituted such that there will be a total of at least
five directors on the board of SAB Zenzele who will be selected as follows:
two SAB appointees; and
at least three directors elected by the shareholders of SAB Zenzele.
The participating Retailers will, as shareholders in SAB Zenzele, have voting
rights in SAB Zenzele. The directors of SAB Zenzele will exercise the voting
rights of the SAB Shares held by SAB Zenzele on behalf of the SAB Zenzele
shareholders.
A prospectus containing the details of the SAB Zenzele offer will be made
available at participating South African Post Offices, SAB or ABI sites, or
the registered office of SAB Zenzele or the transfer secretary, full details
of which will be released in due course.
The SAB Foundation
Rationale
The primary focus of The SAB Foundation will be to engage in community
initiatives that provide benefits to historically disadvantaged South
Africans. Through the Board of Trustees, and its independent Chairman, The
SAB Foundation will aim to distribute the benefits of the transaction to
a wide group of beneficiaries, and oversee the creation and maintenance of a
visible, sustainable fund of a meaningful size, that is able to start
operating within the first year of the transaction being implemented.
The SAB Foundation will primarily focus on supporting entrepreneurship
development as SAB believes this will deliver broad and sustainable economic
benefits for South Africa. It will target historically disadvantaged people
with a priority on women, the youth, and persons with disabilities,
particularly in rural areas.
It is envisaged that The SAB Foundation will continue its existence
indefinitely, becoming an evergreen contributor to community development.
Mechanics
The SAB Foundation element of the transaction will result in 8.4 million F
Ordinary Shares being issued to The SAB Foundation, equating to 1.54% of the
ordinary issued share capital of SAB. The SAB Foundation will not be required
to invest any cash. The SAB Foundation will receive dividends twice a year
and the size of the dividends that are likely to be paid to The SAB
Foundation bi-annually, although dependent on SAB`s operational performance
and capital requirements, is expected to be meaningful. By way of example,
had the transaction been implemented on 1 April 2008, the aggregate amount of
dividends payable to The SAB Foundation would have been approximately R14
million in respect of the SAB financial year ended 31 March 2009. This
amount, net of any costs and administration expenses, could have been used by
The SAB Foundation to make disbursements within its mandate. This example
should, however, not be construed as an indication of future financial
performance and is included for illustrative purposes only.
During the Transaction Term, the operating and capital expenditure of The SAB
Foundation will be funded from the dividends received on the F Ordinary
shares held by The SAB Foundation, as well as from any other donations
received from SAB or other sources. Following the end of the Transaction
Term, The SAB Foundation will principally be funded from dividends received
from its SABMiller shares, as well as from donations received.
Governance
The SAB Foundation allows for between three and ten trustees who will be
appointed by SAB. At all times:
- at least half of the trustees, and the Chairperson, will be independent;
- up to half of the trustees will be SAB employees;
- none of the trustees will be employed by, or be beneficiaries of, The
SAB Foundation; and
- in accordance with the requirements of the Codes, at least half the
trustees will be black persons, and at least 25% of the trustees will be
black women.
Mr Cyril Ramaphosa has agreed to act as the Chairperson of The SAB
Foundation. Mr Ramaphosa is an independent non-executive director of
SABMiller plc.
The other independent trustees to be appointed are Dr. William Rowland,
Honorary President of the South African National Council for the Blind and
Honorary President of Disabled People South Africa, and Polo Radebe, CEO of
the Identity Development Fund Pty Ltd
SAB `s trustees are Norman Adami (Managing Director), Vincent Maphai
(Corporate Affairs and Transformation Director) and Hepsy Mkhungo (Head of
Department: Transformation, CSI and Enterprise Development).
UK SCHEME OF ARRANGEMENT: COURT SANCTION OF THE TRANSACTION
Owing to the dilutive nature of the proposals on SABMiller shareholders, the
Board of SABMiller intends to seek the approval of SABMiller shareholders and
the sanction of the High Court of Justice in England for a scheme of
arrangement between SABMiller and its members under Part 26 of the UK
Companies Act 2006 (the "Scheme") for the issue of shares to or for the
benefit of Employees, Retailers and The SAB Foundation. If the Scheme is
sanctioned by the High Court of Justice in England, it will become binding on
SABMiller and all of its shareholders.
CONDITIONS PRECEDENT
The transaction is subject to the fulfilment or waiver, inter alia, of the
following conditions precedent:
- the passing of the appropriate resolutions by the shareholders of
SABMiller to approve the Scheme and the transaction, and to authorise
the issue of new SABMiller shares and the establishment of The SAB
Zenzele Employee Trust;
- the sanction by the High Court of Justice in England of the Scheme, and
the Scheme becoming effective in accordance with its terms (unless
waived by the directors of SABMiller);
- the registration of SAB Zenzele, The SAB Zenzele Employee Trust and The
SAB Foundation;
- the adoption by SAB and SAB Zenzele of their constitutional documents or
amendments to their constitutional documents as necessary to implement
the transaction, in such form as SABMiller may approve in writing;
- the passing by the shareholders of SAB and SAB Zenzele of such
resolutions as necessary to implement the transaction (including,
without limitation, the adoption or amendment of constitutional
documents referred to above) and the registration of the special
resolutions with the South African Companies Intellectual Property
Registration Office;
- the signature of all agreements required to implement the transaction;
and
- any other regulatory approvals required by SABMiller or the investment
entities in order to effect the transaction having been obtained and
remaining in full force.
Subject to shareholder approval, it is expected that the SAB Zenzele offer to
Retailers will be launched, and the allocations in respect of all three
categories of participants will be finalised, in the first half of 2010.
SHAREHOLDERS INDICATION OF SUPPORT
SABMiller`s two major shareholders, Altria Group, Inc and BevCo Limited, have
each indicated to the SABMiller board their support for the transaction and
have confirmed that they intend to vote in favour of the resolutions to
approve the Scheme and the transaction in respect of their beneficial
holdings of ordinary Shares, which amount to 430,000,000 shares and
225,000,000 shares respectively (representing in total 41.6% of the total
shares eligible to be voted at the meetings).
COURT MEETING
A meeting of SABMiller shareholders will be held at the direction of the
Court of Justice in England ("Court Meeting") at 11:00 on Wednesday, 13
January 2010, at the Grosvenor House Hotel, Park Lane, London W1K 7TN
England, to consider and, if deemed fit, approve the implementation of the
Scheme.
GENERAL MEETING
A general meeting of SABMiller shareholders ("General Meeting") will be held
at 11:15 (or immediately following the conclusion of the Court meeting, if
later) on Wednesday, 13 January 2010, at the same location, to consider and,
if deemed fit, pass, with or without modification, the resolutions required
to approve the transaction, and to authorise the issue of new SABMiller
Shares and the establishment of The SAB Zenzele Employee Trust.
EXPECTED TIMETABLE OF EVENTS
Circular to be posted to SABMiller shareholders to convene the Court Meeting
and the General Meeting of shareholders
15 December 2009
Last day to trade SABMiller Ordinary Shares on the JSE in order to be
recorded in the register of members of SABMiller to vote at the Court Meeting
and the General Meeting
4 January 2010
Last day to trade SABMiller ordinary shares on the LSE in order to be
recorded in the register of members of SABMiller to vote at the Court Meeting
and the General Meeting
8 January 2010
Latest time and date for receipt of Court Meeting Forms of Proxy, and CREST
voting instructions for shareholders who are not registered on the South
African section of the register of members
11.00 am on 11 January 2010
Latest time and date for receipt of General Meeting Forms of Proxy, General
Meeting Voting Instruction Forms and CREST voting instructions for
shareholders who are not registered on the South African section of the
register of members
11.15 am on 11 January 2010
Latest time and date for receipt of Court Meeting Forms of Proxy for
Shareholders who are registered on the South African section of the register
of members
1.00 pm (South African time) on 11 January 2010
Latest time and date for receipt of General Meeting Forms of Proxy for
Shareholders who are registered on the South African section of the register
of members
1.15 pm (South African time) on 11 January 2010
Record date - time by which SABMiller shareholders must be recorded in
SABMiller`s register of members in order to attend and/or vote at the Court
Meeting and the General Meeting
6.00 pm on 11 January 2010
Court Meeting
11.00 am on 13 January 2010
General Meeting
11.15 am on 13 January
2010, or immediately after
conclusion or adjournment
of the Court Meeting, if
later
Announcement of results of the General Meeting and the Court Meeting
13 January 2010
The following dates are subject to change:
Court hearing to sanction the Scheme
3 February 2010
If the Scheme is sanctioned
Announcement about the sanctioning of the Scheme
4 February 2010
Effective date of the Scheme
4 February 2010
Notes:
1. References to times and dates in this document are to London times and
dates unless otherwise stated.
2. Shareholders are advised that, as trading in the ordinary shares of
SABMiller on the JSE is settled within the STRATE environment (five
business days following the trade), shareholders acquiring
dematerialised shares after 4 January 2010 will not be eligible to vote
at the Court Meeting and the General Meeting.
3. If the date of the Court Meeting or General Meeting is adjourned or
postponed, Court Meeting Forms of Proxy and General Meeting Forms of
Proxy or Court Meeting Voting Instruction Forms and General Meeting
Voting Instruction Forms (as the case may be) must be received by no
later than 24 hours prior to the time of the adjourned or postponed
meeting, provided that for the purposes of calculating the latest time
by which such Forms of Proxy and Voting Instruction Forms must be
received, Saturdays, Sundays and public holidays will be excluded.
The dates given in this expected timetable are based on SABMiller`s
current expectations and may be subject to change. If any of the
scheduled dates change, SABMiller will give notice of the change by
issuing an announcement through RNS and SENS.
SABMiller is being advised in connection with the transaction by Standard
Bank as Investment Bank, and by Bowman Gilfillan (South Africa) and Lovells
LLP (UK) as legal advisors.
About SABMiller
SABMiller is one of the world`s largest brewers with brewing interests and
distribution agreements across six continents. The group`s wide portfolio of
brands includes premium international beers such as Grolsch, Miller Genuine
Draft, Peroni Nastro Azzurro and Pilsner Urquell, as well as market-leading
local brands such as Aguila, Castle, Miller Lite, Snow and Tyskie. SABMiller
is also one of the largest bottlers of Coca-Cola products in the world.
In the year ended 31 March 2009, the group reported US$3,405 million in
adjusted pre-tax profit and group revenue of US$25,302 million. SABMiller is
listed on the London and Johannesburg stock exchanges.
This announcement is available on the company website and high resolution
images are available for the media to view and download free of charge from
the Image Library in the News and media section of www.sabmiller.com.
About SAB
SAB was established in 1895 and has in the region of 9,400 permanent
employees, including its soft drinks division, ABI. It owns seven breweries
with a brewing capacity of some 31 million hectolitres. Total beer volumes
during the financial year ended 31 March 2009 were 25.9 million hectolitres.
ABI is the largest producer and distributor of Coca-Cola brands in southern
Africa. With five manufacturing plants in South Africa, ABI accounts for
approximately 60% of Coca-Cola`s sales in South Africa, and total sales
volumes of soft drinks in the year ended 31 March 2009 (including sparkling
soft drinks, fruit juices and water) were 17.3 million hectolitres. SAB is a
South African subsidiary of SABMiller. For more information, visit the
company`s website: www.sablimited.co.za
SABMiller`s history of BBBEE in South Africa
SABMiller has been actively engaged in the advancement of black economic
empowerment initiatives in South Africa since the 1970`s. The group has
progressed a number of initiatives in all spheres of black economic
empowerment, including: ownership, through the creation of Tsogo Sun
Holdings in a landmark black economic empowerment ownership transaction in
the hotel and gaming industry; enterprise development, through the
establishment of a number of benchmark programmes such as SAB`s Owner-Driver
programme, the SAB KickStart Awards (funding and mentoring of aspirant
businesses), the Taung barley farmers programme, the establishment of joint
ventures with black partners to supply certain key raw materials; SAB`s
Mahlasedi Taverner Training programme; and human resources development,
through the implementation of employment equity practices.
In addition, SAB has placed significant focus on procurement equity
throughout its value chain. The company embarked an aggressive black
economic empowerment campaign during the 1980s in an effort to place a
considerable portion of its business with black suppliers. Today, in its
procurement, outsourcing and contract-awarding activities, SAB favours those
companies who have demonstrated a tangible and deliverable commitment to
black economic empowerment principles.
Enquiries:
SABMiller
Tel: +44 20 7659 0100
Sue Clark - Director of Corporate Affairs
Tel: +44 20 7659 0184
Gary Leibowitz - Senior Vice President, Investor Relations
Tel: +44 20 7659 0174
Nigel Fairbrass - Head of Media Relations
Tel: +44 7799 894265
SAB
Vincent Maphai - Executive Director of Corporate Affairs and Transformation
Tel: +27 11 881 8503
Robyn Chalmers - Communications Manager
Tel: +27 11 881 8502
NOTE 1:
HISTORY OF BROAD-BASED BLACK ECONOMIC EMPOWERMENT ("BBBEE")
OVERVIEW OF THE CODES AND SCORECARD PROCESS
Background to the Codes
On 7 January 2004, the South African Government passed into law the Broad-
Based Black Economic Empowerment Act, No. 53 of 2003 (the "Act"). The Act
provides for the Codes for the practical implementation of the Act and these
became operational as of the date of publication in the Government Gazette,
No. 29617, on 9 February 2007.
The Act states that every organ of state and public entity must take into
account the Codes when: determining qualification criteria for issuing of
licences; developing and implementing a preferential procurement policy;
determining qualifications for sale of state-owned enterprises; and
developing criteria for entering into partnerships with the private sector.
Adjustments for "Mandated Investments"
Mandated Investments may be described as investments made through any third
party which is regulated by legislation (for example, a pension fund), on
behalf of the actual investor. When determining the level of equity ownership
of an enterprise in terms of the Codes, up to 40% of the total ownership
rights of that enterprise that is attributable to these Mandated Investments
may be excluded. This exclusion is in recognition of the fact that some of
the beneficiaries of Mandated Investments may be historically disadvantaged
people or groups and this proportion may be administratively burdensome to
verify.
The generic scorecard
A key component of the Codes is the balanced scorecard which measures a
company`s empowerment status in seven core areas. Each area is allocated a
weighting and compliance target, and the overall score determines the rating
of the entity being measured. 20 points of the scorecard are attributed to
equity ownership of the entity by historically disadvantaged people or
groups.
BBBEE elements Code Points
Reference
Direct empowerment
1. Equity ownership 100 20
Human Resources Development
2. Management control 200 10
Indirect empowerment
3. Employment Equity 300 15
4. Skills Development 400 15
5. Preferential Procurement 500 20
6. Enterprise Development 600 15
7. Socio-economic Development 700 5
The BBBEE status of an enterprise is based on the score achieved using the
generic scorecard (below). Recognition is expressed in terms of 8 levels and
Level Four is recognised as to 100%. For example, a company that scores 70
points is classified as a Level Four contributor. Thus, in measuring Code 500
(Preferential Procurement), any procurement from a level four contributor
will be regarded as 100% BBBEE spend.
BBBEE status Qualification generic Recognition
Scorecard points) level
Level 1 contributor > 100 135 %
Level 2 contributor > 85 but < 100 125 %
Level 3 contributor > 75 but < 85 110 %
Level 4 contributor > 65 but < 75 100 %
Level 5 contributor > 55 but < 65 80 %
Level 6 contributor > 45 but < 55 60 %
Level 7 contributor > 40 but < 45 50 %
Level 8 contributor > 30 but < 40 10 %
Non-compliant < 30 points 0 %
The ratings achieved by businesses are important as Government has set
specific targets for Government departments and organs of state in relation
to providing business to black empowered organisations. In order to enhance
their scores, companies can also benefit by doing business with suppliers
with a high BBBEE status, thereby earning points in the preferential
procurement area and ultimately providing positive empowerment effects
throughout the value chain.
In some industries, a minimum BBBEE score is a requirement for the issue or
maintenance of an operating licence from a Government regulator. SAB is
currently a level five contributor to BBBEE. SAB has committed to being at
least a level four contributor by 2012, as part of its regulatory
commitments.
Note 2
Background to IFRS 2
In February 2004 the International Accounting Standards Board ("IASB") issued
IFRS 2 "Share-based payment". Under IFRS 2, SABMiller is required to
recognise an equity balance relating to the in-substance share options
granted, with a corresponding debit to the income statement. In terms of
South African AC 503 - Accounting for Black Economic Empowerment ("BEE")
transactions, the BEE credentials received in transactions do not qualify for
recognition as an asset and are accordingly recognised as an expense.
Fair value of the transactions
IFRS 2 requires recognition of equity-settled share-based payments at the
fair value of the goods and services received, unless that fair value cannot
be estimated reliably. If the entity cannot estimate reliably the fair value
of the goods or services received, the entity shall measure their value, and
the corresponding increase in equity, indirectly, by reference to the fair
value of the equity instruments granted. In the absence of a market price for
the equity instruments granted, fair value is measured by applying an option
valuation methodology to the SAB Shares issued under the transaction,
effectively treating the SAB Shares as if they were, in substance, options to
acquire shares in SABMiller, adjusted for the terms and conditions applicable
to these share options.
A Monte Carlo option pricing methodology has therefore been used to value the
SAB Shares issued to transaction participants. This methodology was used to
simulate future movements of the value of an SAB Share over the Transaction
Term. Dividends are also simulated and used to calculate the value of the
SABMiller shares to be issued at the end of the period. These simulations are
then discounted back to today`s terms, and the average result of all of these
simulations represents the IFRS 2 charge, together with the present value of
the simulated dividends that transaction participants are assumed to be
entitled to receive over the period.
Accounting treatment of the transaction
An IFRS 2 share-based payment expense, as described in the above paragraph
will be recognised in the consolidated financial statements of SAB and of
SABMiller. As at 27 November 2009, the total IFRS 2 expense relating to the
transaction is calculated at approximately US$228 million (R1.7 billion),
using the exchange rate at that date. Of this total IFRS 2 expense, it is
expected that approximately 68% will be expensed in SABMiller`s financial
year ending 31 March 2011 and the remaining 32% will be expensed over the
remainder of the Transaction Term. The total IFRS 2 expense value differs
from the economic cost value because, for accounting purposes, there is no
IFRS 2 expense associated with the issue of shares to The SAB Foundation.
Additional expenses will be reflected in the SABMiller income statement as
and when The SAB Foundation spends the dividend income which it has received
on the F Ordinary Shares. Dividends paid on the E Ordinary Shares and R
Ordinary Shares will not be reflected as an expense in SABMiller`s income
statement, but will reduce the consolidated earnings figure used to calculate
earnings per share.
It is currently anticipated that all three investment entities will be
accounted for as subsidiaries in the accounts of SAB and SABMiller, because
they will be regarded as being controlled by SAB for accounting purposes.
With respect to basic earnings per share calculations, the weighted average
number of shares will not therefore be impacted by the transaction. With
respect to diluted earnings per share calculations, the weighted average
number of shares in issue will increase by the total number of SABMiller
Shares regarded as being potentially dilutive at each reporting date, as if
that date were the end of the Transaction Term, using the market price of
SABMiller shares at the reporting date.
Forward looking statements
This announcement does not constitute an offer to sell or issue or the
solicitation of an offer to buy or acquire securities of SABMiller or any of
its affiliates ("SABMiller Group") in any jurisdiction or an inducement to
enter into investment activity.
This document includes "forward-looking statements". These statements may
contain the words "anticipate", "believe", "intend", "estimate", "expect" and
words of similar meaning. All statements other than statements of historical
facts included in this announcement, including, without limitation, those
regarding the SABMiller Group`s financial position, business strategy, plans
and objectives of management for future operations (including development
plans and objectives relating to the SABMiller Group`s products and services)
are forward-looking statements. These forward-looking statements involve
known and unknown risks, uncertainties and other important factors that could
cause the actual results, performance or achievements of the SABMiller Group
to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. These forward-
looking statements are based on numerous assumptions regarding the SABMiller
Group`s present and future business strategies and the environment in which
the SABMiller Group will operate in the future. These forward-looking
statements speak only as at the date of this announcement. The SABMiller
Group expressly disclaims any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statements contained in this
announcement to reflect any change in the SABMiller Group`s expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based. Any information contained in this announcement
on the price at which the SABMiller Group`s securities have been bought or
sold in the past, or on the yield on such securities, should not be relied
upon as a guide to future performance.
Sponsor:
J.P. Morgan Equities Limited
Date: 08/12/2009 09:00:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
