| Tue 18 May 2010, 14:14 | | FSR - FirstRand - Successful conclusion of the refinancing of the Firstrand |
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FSR
FSR
FSR - FirstRand - Successful conclusion of the refinancing of the Firstrand
Black Economic Empowerment transaction
FirstRand Limited
Incorporated in the Republic of South Africa
Registration number: 1966/010753/06
JSE Share Code: FSR
Namibian Stock Exchange: FST
ISIN: ZAE000014973
("FirstRand" or "the Company")
SUCCESSFUL CONCLUSION OF THE REFINANCING OF THE FIRSTRAND BLACK ECONOMIC
EMPOWERMENT TRANSACTION
Introduction
Shareholders are referred to the announcement released on SENS by FirstRand
Limited on 8 April 2010 regarding the successful placement of FirstRand ordinary
shares by the FirstRand Empowerment Trust ("FRET"), as part of the refinancing
of its existing black economic empowerment ("BEE") transaction ("BEE
Transaction") ("the Refinancing").
FirstRand and FRET are pleased to announce that the refinancing of approximately
R3.37 billion of existing third party funding has now been successfully
concluded by FRET. FirstRand and FRET believe that the refinancing will result
in an optimal funding structure for the remaining term of the BEE Transaction
and will result in a robust and sustainable BEE Transaction, particularly in
light of increased market volatility.
Background to the BEE Transaction
In 2005 FirstRand facilitated the acquisition of 6.5% of its issued share
capital (363.8 million FirstRand ordinary shares) by FRET as part of its BEE
Transaction. Pursuant to the unbundling of Discovery Holdings Limited
("Discovery") by FirstRand in 2007, FRET became the holder of 20.4 million
Discovery ordinary shares, in addition to the 363.8 million FirstRand ordinary
shares it already held.
The BEE Transaction implemented in 2005 was funded through a combination of BEE
capital contributions, vendor and third party funding. While the term of the
initial third party funding was 5 years maturing in 2010, it was always
envisaged that FRET would, subject to it being commercially feasible, refinance
the third party funding in 2010 for a further 5 years since the BEE Transaction
contemplated a 10 year term maturing in 2014.
FirstRand remains firmly committed to the process of achieving transformation in
South Africa and continues to strive to ensure that the long term benefits of
its BEE Transaction reach the widest possible community of black South Africans.
FirstRand believes that its BEE Transaction, following the refinancing, remains
inherently sustainable and resilient to changes in market conditions and will
continue to achieve meaningful participation, both economically and otherwise,
for the BEE beneficiaries.
FirstRand shareholders ("Shareholders") are referred to the detailed terms
announcement regarding the BEE Transaction released by FirstRand on SENS on 24
February 2005 and detailed in the circular to Shareholders posted on 23 March
2005 for information on the BEE Transaction.
Principle terms of the Refinancing
The principles, structure and terms of the BEE Transaction approved by
Shareholders in general meeting in 2005 do not change as a result of the
Refinancing and Shareholders will not be required to provide any additional
facilitation to support the BEE Transaction.
The Refinancing comprises the repayment of approximately R3,371 million of
outstanding funding, the distribution of R200 million to BEE beneficiaries and
the funding of transaction costs through:
- the raising of new senior funding of R1,537 million;
- the raising of new mezzanine funding of R444m ; and
- the realisation of R1,668m in proceeds from the disposal of 77,846,154
FirstRand shares and 4,415,294 Discovery shares.
The following institutions have indirectly funded FRET in respect of the R1,981m
in new 5 year term senior and mezzanine funding:
- China Construction Bank;
- Investec Bank Limited;
- Investec Asset Management;
- Sanlam Capital Markets;
- Stanlib; and
- Libfin.
FirstRand believes China Construction Bank`s participation as the largest senior
funder to FRET underscores the level of commitment by China`s second largest
bank to FirstRand and South Africa.
FRET`s remaining 285,953,846 FirstRand shares and 16,006,364 Discovery shares
will be pledged and ceded to the funders as collateral for the funding raised.
Any further shares which stem from the FirstRand and Discovery shares, including
but not limited to shares unbundled by either FirstRand or Discovery, will form
part of the shares pledged and ceded to the funders.
Benefits of the Refinancing
The Refinancing has enabled FRET to realise proceeds from the sale of FirstRand
and Discovery shares and to repay a significant portion of the mezzanine funding
in place in the current funding structure. This has enabled FRET to optimise
pricing and reduce costs on the new funding, while at the same time, de-risking
the funding structure and increasing the sustainability of the entire BEE
Transaction.
The BEE Transaction has been a success for both FirstRand and the BEE Partners.
The BEE Transaction has generated net value attributable to the BEE
beneficiaries in excess of R4 billion (at a compound annual growth rate of c.
24% per annum) and has resulted in the development of a successful long term
partnership between FirstRand and its BEE beneficiaries. The Refinancing process
has also resulted in a R200 million distribution to the BEE beneficiaries. The
BEE beneficiaries have indicated that these funds will be utilised to settle
each vested beneficiary`s proportion of the tax liabilities arising from the
disposal of shares by FRET as well as to invest in projects and initiatives at
the beneficiary level. The repayment of a significant portion of the existing
funding is also expected to result in an increase in the annual dividend paid to
the BEE beneficiaries.
BEE dilution for FirstRand
The BEE Transaction implemented in 2005 resulted in:
- 363.8m FirstRand shares being issued to FRET which constituted, at the
time, 6.5% of FirstRand; and
- 198.4m FirstRand shares being issued to black staff and non-executive
directors which constituted, at the time, 3.55% of FirstRand.
Immediately prior to the Refinancing, the combined direct BEE shareholding of
562.2m FirstRand shares constituted approximately 10.0% of FirstRand, based on
the gross number of shares in issue of 5,637.9m. Pursuant to the Refinancing,
FRET placed c. 77.8 million shares in the market, equating to 1.4% of FirstRand,
based on 5,637.9m shares in issue. Consequently, the level of direct BEE
shareholding reduced from approximately 10.0% to approximately 8.6%.
Historically disadvantaged FirstRand staff also own 45.4 million shares through
the various FirstRand schemes, which equates to a further 0.8% interest in
FirstRand`s operations. FirstRand, however, also has operations outside of SA
and accordingly as a percentage of SA assets, the FirstRand direct BEE
shareholding is 10.6%.
FRET will continue to hold 285,953,846 FirstRand ordinary shares until 2014, in
terms of the existing lock in provisions of the BEE Transaction agreements
(approximately 5.1% of FirstRand, based on 5,637.9m FirstRand shares in issue).
Composition of FRET and resultant effective interest in FirstRand
Following the implementation of the Refinancing, FRET will hold in aggregate
5.1% of FirstRand. This aggregate shareholding will be split amongst the
beneficiaries based on their level of participation in FRET, as set out in the
table below:
Funder Participation Effective
in FRET interest in
FirstRand
FirstRand Empowerment Foundation 32.3% 1.7%
The Kagiso Charitable Trust 25.8% 1.3%
Kagiso Trust Investment 6.4% 0.3%
The WDB Trust 11.3% 0.6%
WDB Investment Holdings 2.8% 0.1%
The Mineworkers Investment Trust 12.3% 0.6%
MIC Financial Holdings 3.1% 0.2%
Performance linked units 6.0% 0.3%
Total 100.0% 5.1%
Notes:
1. Effective interest in FirstRand calculated based on 5,637.9 million
FirstRand shares in issue
2. Performance linked units are allocated over the remaining period of the BEE
Transaction to the BEE beneficiaries based on their relative contributions
and/or achievement of agreed performance criteria and targets
Sandton
18 May 2010
Merchant bank and sponsor to FirstRand
Rand Merchant Bank (a division of FirstRand Bank Limited)
Financial advisor to FRET & lead debt arranger
Rand Merchant Bank (a division of FirstRand Bank Limited)
Legal advisor to FRET
ENS
Tax advisor to FRET
Voster Perreira
Legal advisor to the funders
Deneys Reitz, ENS and Bowman Gillfillan
Date: 18/05/2010 14:14:16 Produced by the JSE SENS Department.
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