Financial Services Editor
FINANCIAL services group AMB Holdings is to buy back 44-million of its own shares, about 32% of the total, as it addresses market concerns about the extent to which it had lent money to finance the purchase of AMB shares.
The group will also finally make a R286m offer to minorities in private equity subsidiary AMB-Pep, 15 months after the first move to delist it. Minorities hold about 40% of AMB-Pep. The offer is R12,25 in cash or R13 cash and promissory notes, the same price offered early last year when the deal did not gain regulatory approval.
The buyback offer covers shares worth about R329m held by empowerment group Pamodzi, as well as by an AMB staff scheme and share incentive trust. The deal has no cash-flow implications as AMB lent these entities funds to buy the shares and the cash from the buyback will be used to repay the loans, which AMB will write off. AMB provided about R100m against these loans in its end-September income statement, based on a write-down of the shares to the then market price of R6,55.
The share price, which had dipped, is back at that level so the group does not expect to make further provisions.
The loan structures go back two to three years, when AMB brought in Pamodzi as empowerment partner and, it is understood, put the employee share schemes in place to protect against a hostile bid as it had no controlling shareholder. But the group has come under fire for its heavy exposure to its own shares. It has shed its banking licence, so lending to shareholders is even less appropriate.
CE Andrew Sprague said the group had had talks with about a dozen empowerment groups and narrowed this down to three or four. It would take a couple of months more to reach a deal.
After the buyback, management and staff will hold about 15% of AMB individually and through the share incentive trust; not all its shares are being bought back.
AMB had about R230m in cash at end-September. It plans to return some of this to shareholders as a dividend. The buyback would represent net cash outflow of about R190m; there is cash of about R80m in the private equity firm, much of it deferred through payment in promissory notes at a rate of 11,5%.
Apr 03 2003 07:00:48:000AM Hilary Joffe Business Day 1st Edition
Thursday
03 April 2003
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