| Tue 10 Aug 2010, 8:59 | | ACL - Arcelormittal South Africa - Terms of Arcelormittal South Africa Black |
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ACL
ACL
ACL - Arcelormittal South Africa - Terms of Arcelormittal South Africa Black
Economic Empowerment ownership transaction and further cautionary announcement
ARCELORMITTAL SOUTH AFRICA LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1989/002164/06)
Share code: ACL
ISIN : ZAE000134961
("ARCELORMITTAL SOUTH AFRICA")
TERMS OF ARCELORMITTAL SOUTH AFRICA BLACK ECONOMIC EMPOWERMENT ("BEE") OWNERSHIP
TRANSACTION AND FURTHER CAUTIONARY ANNOUNCEMENT
HIGHLIGHTS
* In line with ArcelorMittal South Africa`s commitment to
transformation objectives as enunciated in the country`s
empowerment legislation, the finalisation of a transaction
providing for equity ownership in respect of 26% of ArcelorMittal
South Africa`s operating assets through BEE SPV and ESOP Newco,
with an aggregate transaction value of R 9.075 billion.
* Facilitation by ArcelorMittal South Africa of participation by BEE
SPV and ESOP Newco.
* Broadening and transforming ownership base in respect of
ArcelorMittal South Africa`s operating assets.
* BEE SPV participation through the Ayigobi Consortium led by Sandile
Zungu, which includes new entrants, women, youth and strategic
groups. ESOP Newco will consist of an employee share ownership
plan.
* Contribution to broad-based BEE equity ownership complying beyond
the 10 years and 25% target as required by the Broad-Based BEE
Codes of Good Practice.
1 INTRODUCTION
1.1 Shareholders of ArcelorMittal South Africa ("Shareholders") are
referred to the announcement dated 19 September 2008 in which
Shareholders were informed that ArcelorMittal South Africa is
involved in negotiations to give effect to a BEE transaction.
Such announcement was withdrawn on Thursday, 18 December 2008
due to the economic climate and market conditions prevailing at
the time. More recently, and on Tuesday, 30 March 2010,
ArcelorMittal South Africa announced to Shareholders via the
Stock Exchange News Service ("SENS") and in the press that the
board of directors of ArcelorMittal South Africa has
recommenced discussions pertaining to a 26% broad-based BEE
ownership transaction which includes an employee share
ownership plan ("ESOP") (the "Transaction").
1.2 These discussions have culminated in the conclusion of a
Subscription and Shareholders` Agreement on 9 August 2010
between ArcelorMittal South Africa and Lexshell 771 Investments
(Pty) Ltd ("BEE SPV") and Lexshell 769 Investments (Pty) Ltd
("ESOP Newco"), in relation to ArcelorMittal South Africa
Operations (Pty) Ltd ("OPCO") (the "Subscription and
Shareholders` Agreement"), to give effect to the Transaction.
In terms of the Subscription and Shareholders` Agreement and
subject to ArcelorMittal South Africa shareholder approval and
fulfilment of further conditions precedent set out in paragraph
3.10 below by Monday, 28 February 2011 -
1.2.1 ArcelorMittal South Africa shall transfer its operating assets
to OPCO, a wholly owned subsidiary of ArcelorMittal South
Africa which has not previously traded, in return for further
OPCO ordinary shares;
1.2.2 BEE SPV, a special purpose vehicle through which the BEE
participants will hold an indirect equity interest in OPCO,
shall subscribe for 210 "A" ordinary shares in the capital of
OPCO at a subscription price of R 1 per share, constituting 21%
of OPCO`s entire issued share capital; and
1.2.3 ESOP Newco, a special purpose vehicle for facilitating an
employee share ownership scheme in respect of OPCO shares,
shall subscribe for 50 "B" ordinary shares in the capital of
OPCO at a subscription price of R 1 per share, constituting 5%
of OPCO`s entire issued share capital.
1.2.4 As a result of the aforegoing transactions, the issued ordinary
share capital of OPCO will be held as follows-
1.2.4.1 74% thereof by ArcelorMittal South Africa;
1.2.4.2 21% thereof by BEE SPV; and
1.2.4.3 5% thereof by ESOP Newco.
1.3 At the closing price of R 87.00 per ArcelorMittal South Africa
ordinary share on Monday, 2 August 2010, the Transaction has a
value of R 9.075 billion.
2 RATIONALE FOR AND PRINCIPLES OF THE TRANSACTION
2.1 In line with the BEE objectives enunciated by the Broad-Based
Black Economic Empowerment Act and the Broad-Based BEE Codes
of Good Practice ("Codes"), the Transaction, if implemented,
will allow a broad-based group of Black People (as defined in
the Codes), including women, youth and Black and other
employees of ArcelorMittal South Africa and subsidiaries of
ArcelorMittal South Africa, to benefit from an aggregate 26%
equity ownership in respect of ArcelorMittal South Africa`s
operating assets.
2.2 In structuring the Transaction, ArcelorMittal South Africa was
guided, inter alia, by the following principles -
2.2.1 the vesting in BEE SPV and ESOP Newco, representing the
interests of the BEE participants and employees, from
inception, of full voting rights in respect of 26% of the
operating assets of ArcelorMittal South Africa;
2.2.2 ensuring that a broad-based group of BEE participants acquires
the 21% economic interest in ArcelorMittal South Africa`s
operating assets, by requiring that such group contains the
relevant elements of; broad-based, black women and black new
entrants participation (having reference to the requirements
of the Codes in this regard) ("Minimum Required B-BBEE
Shareholding Composition");
2.2.3 broadening ownership of ArcelorMittal South Africa operating
assets amongst Black and other employees of ArcelorMittal
South Africa and subsidiaries of ArcelorMittal South Africa,
through ESOP Newco`s acquisition of a 5% economic interest in
OPCO;
2.2.4 achieving a sustainable BEE transaction at an acceptable
economic cost to Shareholders; and
2.2.5 ensuring compliance with the letter and spirit of the Codes.
3 TRANSACTION PARTICULARS
3.1 Ownership Structure
Post implementation of the Transaction, the operating assets of ArcelorMittal
South Africa shall be owned by OPCO, and the issued share capital in OPCO shall
be held as follows:
3.1.1 74% thereof by ArcelorMittal South Africa;
3.1.2 21% ("A" Ordinary Shares) by BEE SPV; and
3.1.3 5% ("B" Ordinary Shares) by ESOP Newco.
3.2 BEE SPV is to be controlled by Ayigobi Consortium, a
consortium led by Sandile Zungu, which consortium provides
for the following broad-based elements/categories of
empowerment: women, youth and strategic groups. The BEE
participants shall include the following entities/individuals
-
3.2.1 ZICO SPV (led by Sandile Zungu);
3.2.2 Mabelindile Archibald Luhlabo;
3.2.3 Mojalefa Mbete;
3.2.4 Pragat Investments (Jagdish Parekh);
3.2.5 Prudence Zerah Mtshali;
3.2.6 Phemelo Ohentse Robert Sehunelo;
3.2.7 Zebo Lesego Edwin Tshetlho;
3.2.8 Oakbay Investments (Gupta family members); and
3.2.9 Mabengela Investments (led by Duduzane Zuma).
3.3 Approximately 25% of the shareholding in BEE SPV remains to
be allocated to a women-led consortium.
3.4 Transfer to OPCO of ArcelorMittal South Africa Operating
Assets
3.4.1 OPCO is a wholly owned subsidiary of ArcelorMittal South
Africa which has not previously traded. ArcelorMittal South
Africa confirms that the Articles of Association of OPCO will
be amended to conform to Schedule 10 of the JSE Listings
Requirements. At inception of the Transaction, OPCO`s
authorised share capital is R1 000 consisting of 1 000
ordinary par value shares of R1 each, of which 1 ordinary
share is in issue to ArcelorMittal South Africa.
ArcelorMittal South Africa will transfer the ArcelorMittal
South Africa operating assets to OPCO in return for the
allotment and issue to ArcelorMittal South Africa of a
further 739 ordinary shares, credited as shares fully paid
up.
3.4.2 The operating assets to be transferred pursuant to giving
effect to the Transaction shall be:
3.4.2.1 all of the existing operating assets, excluding the
following: 100% shareholding in and loan claim against Vicva
Investments and Trading Nine (Proprietary) Limited; 100%
shareholding in and loan claim against Iscor Landgoed
(Proprietary) Limited; 100% shareholding in and loan claim
against Pybus Fifty-Seven (Proprietary) Limited and 100%
shareholding in ArcelorMittal South Africa Investments and
Trading One Limited; and
3.4.2.2 transferred at the book value thereof, amounting to R 21.263
billion, based on the most recent published financial results
of ArcelorMittal South Africa (as at 30 June 2010) and the
assumption that all of the conditions in relation to the
Transaction will be fulfilled.
3.5 Introduction of BEE SPV and ESOP Newco
Subscription for "A" and "B" Ordinary Shares
3.5.1 210 "A" ordinary shares (constituting 21% of OPCO`s share capital)
will be created in the share capital of OPCO, by converting 210
authorised, unissued ordinary shares into "A" ordinary shares, having
the rights and privileges set out in paragraph 3.7 below.
3.5.2 50 "B" ordinary shares (constituting 5% of OPCO`s share capital), will
be created in the share capital of OPCO, by converting 50 authorised,
unissued ordinary shares into "B" ordinary shares, having the rights
and privileges set out in paragraph 3.8 below.
3.5.3 BEE SPV (a company newly established to hold the BEE participants`
indirect shareholding in OPCO) will subscribe for the "A" ordinary
shares and ESOP Newco (a special purpose vehicle for facilitating an
employee share ownership plan in relation to OPCO shares) for the "B"
ordinary shares, in both instances at par value. The entities and
individuals referred to in paragraph 3.2 above, will be included as
the recipients of dividends paid by BEE SPV from the income it
receives in respect of dividends on the "A" ordinary shares paid by
OPCO from time to time, subject to the limitation detailed in
paragraph 3.6.2.1.1 below.
3.5.4 Employees of ArcelorMittal South Africa and subsidiaries of
ArcelorMittal South Africa, will be the recipients of dividends paid
by ESOP Newco from income it receives in respect of dividends on the
"B" ordinary shares, subject to the limitation detailed in paragraph
3.8.1 below.
3.6 Exit by BEE SPV and ESOP Newco at the end of the Transaction
3.6.1 BEE Put Option
3.6.1.1 ArcelorMittal South Africa shall grant the shareholders of BEE SPV
("SEPs") the right and option ("Put Option"), to require that
ArcelorMittal South Africa purchases from the SEPs collectively, all
of the shares held by the SEPs in the capital of BEE SPV ("Put
Shares"), inter alia, on the following terms and conditions -
3.6.1.1.1 the Put Option shall be exercisable by the SEPs at any time after the
later of four years from the effective date of the Transaction
("Effective Date") and ArcelorMittal South Africa receiving
confirmation from the Department of Trade and Industry and the
Department of Mineral Resources, that OPCO shall be permitted to
continue to recognise the BEE rating afforded to it through the
Transaction, notwithstanding the exit of the SEPs ("Confirmation"),
provided that if the Confirmation is not received by the fourteenth
anniversary of the Effective Date, the Put Option shall be exercisable
regardless;
3.6.1.1.2 the purchase price payable by ArcelorMittal South Africa for the Put
Shares ("Put Price"), shall be calculated in accordance with a
predetermined formula which considers, inter alia, the inherent value
of shares in BEE SPV, determined by reference to the 30-day volume
weighted average price ("VWAP") of an ArcelorMittal South Africa
ordinary share; and
3.6.1.1.3 subject to satisfaction of any applicable regulatory requirements, the
aggregate Put Price, at the election of ArcelorMittal South Africa,
shall either be paid in cash or discharged through the allotment and
issue by ArcelorMittal South Africa to the SEPs of fullypaid
ArcelorMittal South Africa ordinary shares.
3.6.2 OPCO`s Repurchase Right in respect of "A" Ordinary Shares
3.6.2.1 The "A" ordinary shares will be issued by OPCO to BEE SPV, subject to
the following conditions -
3.6.2.1.1 the right to receive only 5% of the ordinary dividends and none of the
extraordinary dividends declared in respect of the "A" ordinary shares
("Trickle Dividend"), during the period commencing on the date of
issue of such shares ("Issue Date") and ending on the date of their
repurchase as detailed in paragraph 3.6.2.1.2 below ("Transaction
Term"); and
3.6.2.1.2 provided that at such time the SEPs have not yet exercised the Put
Option referred to in paragraph 3.6.1 above, OPCO will have the right
(""A" Repurchase Right") at any time during years 5 to 20 from the
Effective Date, to repurchase from BEE SPV, a certain number of the
"A" ordinary shares at their par value (the ""A" Repurchase Shares").
The "A" Repurchase Right will be automatically exercised at the end of
year 20. The number of the "A" Repurchase Shares will be calculated in
accordance with a predetermined notional funding formula which
considers the following -
3.6.2.1.2.1 the 30-day VWAP of an ArcelorMittal South Africa ordinary share
at the end of the Transaction Term; and
3.6.2.1.2.2 the dividends not paid to BEE SPV due to the suspension of
dividend rights attaching to the "A" ordinary shares during the
Transaction Term as described in paragraph 3.6.2.1.1 above.
3.6.2.2 Immediately after the repurchase by OPCO of the "A" Repurchase Shares,
the suspension on dividend rights in respect of the remaining "A"
ordinary shares not repurchased by OPCO will cease, to the effect that
the "A" ordinary shares will automatically become ordinary shares and
carry identical rights and benefits to the OPCO ordinary shares held
by ArcelorMittal South Africa. At this stage, OPCO will be entitled
to repurchase the remaining "A" ordinary shares at market value, with
the purchase consideration to be settled, at the election of
ArcelorMittal South Africa and subject to any applicable regulatory
requirements, in cash or through the issue by ArcelorMittal South
Africa of fullypaid ArcelorMittal South Africa ordinary shares.
3.6.3 OPCO`s Repurchase Right in respect of "B" Ordinary Shares
3.6.3.1 The "B" ordinary shares will be issued by OPCO to ESOP Newco,
substantially on the same conditions as those applying to the "A"
ordinary shares, save that -
3.6.3.1.1 the 5% Trickle Dividend will be paid until the fifth anniversary of
the Issue Date; and
3.6.3.1.2 OPCO will have the right to repurchase, after the fifth anniversary of
the Issue Date, a certain number of the "B" ordinary shares (the ""B"
Repurchase Shares") at their par value, with the number of the "B"
Repurchase Shares being calculated in accordance with an agreed
notional funding formula.
3.6.3.2 After repurchase by OPCO of the "B" Repurchase Shares, the suspension
on dividend rights in respect of the "B" ordinary shares not
repurchased by OPCO will cease and at this time, OPCO will be entitled
to repurchase the remaining "B" ordinary shares at market value, with
the purchase consideration to be settled by ArcelorMittal South
Africa, on the same basis as in paragraph 3.6.2.2 above.
3.7 Rights and Privileges attaching to Class "A" Ordinary Shares in OPCO
The 210 "A" ordinary shares in the capital of OPCO will have the following
rights and privileges -
3.7.1 from the Issue Date until exercise by OPCO of the "A" Repurchase Right
(the "Suspension Period"), the right of the holder thereof (BEE SPV)
to receive ordinary dividends and/or extraordinary dividends, will be
limited to 5% of the amount of annual dividends declared in respect of
the "A" ordinary shares;
3.7.2 BEE SPV`s right to receive the balance of dividends accrued but not
received in respect of the "A" ordinary shares during the Suspension
Period, will be taken into account in the formula referred to in
paragraph 3.6.2.1.2 above; and
3.7.3 apart from the suspension of dividend rights (which shall cease at the
end of the Suspension Period), the "A" ordinary shares will have
exactly the same rights (including voting rights) as, and in all
respects rank pari passu with, the 740 OPCO ordinary shares held by
ArcelorMittal South Africa.
3.8 Rights and privileges attaching to Class "B" Ordinary Shares in OPCO
The 50 "B" ordinary shares in the capital of OPCO will have the following rights
and privileges -
3.8.1 for a period of five years from the date of their issue, the right of
the holder thereof (ESOP Newco) to receive ordinary dividends and/or
extraordinary dividends will be limited to 5% of the amount of annual
dividends declared in respect of the "B" ordinary shares;
3.8.2 ESOP Newco`s right to receive the balance of dividends accrued in
respect of the "B" ordinary shares during the fiveyear suspension
period, will be taken into account in the formula referred to in
paragraph 3.6.3.1 above; and
3.8.3 apart from the suspension of dividend rights, the "B" ordinary shares
will have exactly the same rights (including voting rights) as, and in
all respects rank pari passu with, the 740 OPCO ordinary shares held
by ArcelorMittal South Africa.
3.9 Governance of Future Relationship between ArcelorMittal South Africa, BEE
SPV and ESOP Newco
3.9.1 From the Effective Date, the Subscription and Shareholders` Agreement
shall govern the relationship between ArcelorMittal South Africa, BEE
SPV and ESOP Newco as co-shareholders in OPCO.
3.9.2 The Subscription and Shareholders` Agreement, inter alia, provides for
-
3.9.2.1 ArcelorMittal South Africa and OPCO to have a common board of
directors and BEE SPV being entitled to appoint 1 OPCO board member
which must be a Black Person (as defined in the Codes);
3.9.2.2 a BEE lock-in binding BEE SPV, until the permitted exits described in
paragraph 3.6 above and an obligation on BEE SPV to procure that the
constitutional documents of its direct and indirect shareholders,
contain appropriate lockin provisions which mirror those binding BEE
SPV;
3.9.2.3 a forced sale to ArcelorMittal South Africa at fair value of the "A"
ordinary shares upon the insolvency of BEE SPV; and
3.9.2.4 the terms of the Put Option and "A" and "B" Repurchase Rights.
3.10 Conditions Precedent
The Subscription and Shareholders` Agreement and the Transaction are subject to
the fulfilment, by no later than Monday, 28 February 2011, of the following
conditions precedent -
3.10.1 approval of the Transaction by the respective boards of directors of
ArcelorMittal South Africa, BEE SPV and ESOP Newco and by
Shareholders;
3.10.2 the circular and any other documentation to be sent to Shareholders
pursuant to the JSE Limited Listings Requirements ("Listings
Requirements"), having been approved by the JSE Limited ("JSE") and
OPCO`s articles of association having been amended to the extent
necessary to comply with the requirements of Schedule 10 of the
Listings Requirements;
3.10.3 to the extent required, obtaining approval of and/or necessary rulings
in relation to the Transaction from all applicable regulatory
authorities, including the JSE and the Securities Regulation Panel;
3.10.4 ArcelorMittal South Africa notifying BEE SPV in writing, that
ArcelorMittal South Africa is satisfied with the identity of the
shareholders introduced into BEE SPV, the direct and indirect
ownership structure which had been established in respect of BEE SPV
and that such ownership structure achieves the Minimum Required BBBEE
Shareholding Composition prescribed by ArcelorMittal South Africa;
3.10.5 OPCO in general meeting having adopted special resolutions to create
the "A" and "B" ordinary shares and such resolutions having been
registered with the Registrar of Companies; and
3.10.6 the transfer by ArcelorMittal South Africa to OPCO of the
ArcelorMittal South Africa operating assets having been completed and
a shareholders` agreement in relation to BEE SPV being entered into
between the shareholders of BEE SPV and ArcelorMittal South Africa.
4 SALIENT DATES AND TIMES
Circular and notice of general Monday, 6 September 2010
meeting posted to Shareholders on or
about
Last day for receipt of forms of Friday, 24 September 2010
proxy for the general meeting by
09h00 on or about
General meeting to be held at 09h00 Tuesday, 28 September 2010
at the address stipulated in
paragraph 5 below on or about
Results of the general meeting Tuesday, 28 September 2010
released on SENS on or about
Results of the general meeting Wednesday, 29 September 2010
published in the South African press
on or about
All times shown in this announcement are South African times. These salient
dates and times are subject to amendment. Any such relevant amendments will be
released on SENS and published in the South African press.
5 GENERAL MEETING
A general meeting of Shareholders ("General Meeting") will be held at 09h00 on
or about Tuesday, 28 September 2010, at Kwena Suite, Hilton Sandton, 138 Rivonia
Road, Sandton, South Africa, to consider and, if deemed fit, pass, with or
without modification, the necessary resolutions to implement the Transaction.
6 FURTHER DOCUMENTATION
A circular setting out the full terms of the Transaction and convening the
General Meeting will be posted to Shareholders on or about Monday, 6 September
2010.
7 FURTHER CAUTIONARY ANNOUNCEMENT
The pro-forma financial effects of the Transaction were not yet available at the
time of the publication of this announcement. Such detail will be announced by
no later than Monday, 30 August 2010. Accordingly, Shareholders are advised to
continue exercising caution when dealing in ArcelorMittal South Africa
securities, until a further announcement is made in this regard.
Vanderbijlpark
Tuesday, 10 August 2010
For further information please contact:
Hennie Vermeulen Manager: Investor Relations
Tel: (016) 889 2352
Financial Advisors
Goldman Sachs International
Goldman Sachs International, which is regulated in the United Kingdom by the
Financial Services Authority, is acting exclusively for ArcelorMittal South
Africa and no one else in connection with the Transaction and will not be
responsible to anyone other than ArcelorMittal South Africa for providing the
protections afforded to clients of Goldman Sachs International nor for providing
advice in connection with the Transaction or any other matters referred to in
this announcement.
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Legal Advisors
Werksmans Inc
Date: 10/08/2010 08:59:46 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.
