| Thu 13 Oct 2005, 14:08 | | Glenrand M.I.Bs black economic empowerment transac |
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Glenrand M.I.B"s black economic empowerment transaction: Q&A
Glenrand MIB Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/008001/06)
Share code: GMB & ISIN: ZAE000018529
("the company" or "Glenrand MIB")
Glenrand M.I.B"s black economic empowerment transaction: Q&A
Q. Who are the partners?
A. Glenrand MIB"s partners are Ayavuna Women"s Investments, Matemeku
Investments and existing BEE partner, Kunene Bros. Holdings. Each will
acquire 5,9% of the equity of Glenrand MIB, giving a total of 17,7% (post
the issue of new shares and repurchase).
Two of these - Ayavuna Women"s Investments and Matemeku Investments - are
new to Glenrand MIB. KBH has a long-standing relationship with Glenrand
MIB, and has held a 6,1% stake (prior to dilution and held through Kunene
Finance Company) in the group since 2002. This transaction increases the
shareholding by 5,9% (held through the black-owned KBH), giving a total
Kunene shareholding of 11,3% (post the issue of new shares and repurchase).
Dr. Dudu Kunene has served on the Glenrand MIB board in an executive
capacity since 2000. Hixonia Nyasulu and Moss Mashishi will join the board
as non-executive directors.
A further 3.6% (post the issue of new shares and repurchase) has been
earmarked for historically disadvantaged staff of Glenrand MIB, held via
the Glenrand MIB Employee Empowerment Trust. The 3.6% is in addition to
the 0.7% currently owned by the Trust.
Q. What are the backgrounds of the three partners?
A. All three partners come from diverse business backgrounds but share a point
of commonality in that all are highly successful, experienced and deeply
cognisant of the dynamics of the South African business environment. They
are also passionately committed to transformation.
Q. Why were these partners chosen?
A. Glenrand MIB signalled its support for broad-based black economic
empowerment when it sold 6,1% of its equity to Kunene Finance Company in
2002. It was always anticipated that the group"s BEE shareholding would be
increased and widened for strategic and competitive positioning.
Negotiations with potential BEE partners commenced, and a shortlist was
drawn up based on several criteria: the ability of the BEE partners to add
value to the group by way of strategic contribution, new business
development, commitment to driving transformation throughout the
organisation, and their broad-based representivity.
Glenrand MIB management deemed it essential to achieve broad-based
black empowerment, and to this end 4.3% (post the issue of new shares and
repurchase) of shares have been allocated for historically disadvantaged
staff. This is in addition to the broad constituency of stakeholders
introduced by the three partners.
Q. What is the total BEE shareholding in Glenrand MIB?
A. BEE partners now own 27,4% (post the issue of new shares and repurchase) of
the group.
Q. At what share price was the deal struck?
A. At a price of 215 cents per Glenrand MIB share.
Q. How will the deal be financed?
A. An innovative funding structure has been put in place, whereby Glenrand MIB
will issue new shares to the partners on a notional funding basis. A total
of 48 million new "subscription" shares will be issued to the three
partners by way of a notional loan, valued at R103 million. Because this is
a notional loan, the economic cost to Glenrand MIB is some 4.3% of market
cap which is in line with market norms. The partners will receive
"capitalisation" shares in lieu of cash dividends for the 10 year duration
of the agreement.
Glenrand MIB will call sufficient shares to expunge the outstanding
notional funding at the end of the 10 year period. Alternatively, the
partners can settle the transaction in full at any point during this
period, provided they retain a minimum shareholding of 5,9% in Glenrand
MIB.
Q. Does this mean the partners receive no cash benefit for 10 years, since
they cannot sell their shares and all dividends will be paid in the form of
shares?
A. The partners can settle the outstanding notional loan at any point during
this 10 year period and then receive cash dividends. The higher the share
price, the fewer shares they will be required to pay over to Glenrand MIB
in settlement of the notional loan. The partners further receive a cash
performance fee over the period of the transaction based on their
individual performance.
Q. Will the partners outlay any cash of their own?
A. Each of the three partners will pay a 2% deposit, equivalent to about R689
000, for the shares. The issued shares will then be listed as fully paid up
in the share capital of Glenrand MIB.
Q. Does the issue of these new shares dilute existing shareholders?
A. The dilutory effect of the transaction will be mitigated by the repurchase
by Glenrand MIB of 7.5% of its equity, subject to shareholder approval.
Q. Is there any cost attached to the notional loan for the partners?
A. The partners will pay a market-related interest rate of 9,3% a year on this
notional loan.
Q. How will shares be allocated to historically disadvantaged staff under the
Glenmib Employee Empowerment Trust?
A. The aim is to encourage the retention and promotion of historically
disadvantaged employees to positions of seniority within the group. The
shares will vest over a period of several years to ensure the continued
commitment of those benefiting under the scheme.
Q. What benefits will this deal bring to Glenrand MIB?
A. The partners will become involved in the business of Glenrand MIB in
several ways: at board level, and at the level of remuneration and
nominations committee, group audit risk and compliance committee and the
transformation committee.
It is expected that the partners" involvement in Glenrand MIB"s business
will result in improved business retention and new business flows,
accelerated transformation and an improved corporate profile for Glenrand
MIB.
The partners have a financial incentive to assist Glenrand MIB in
accelerating transformation and meeting its business objectives.
ends
ISSUED FOR: GLENRAND M.I.B LIMITED
CONTACT : Steve von Roretz, CEO: 011 329 1427 / 083 326 6319
FAX NO : 011 293 2755
E-MAIL : svonroretz@glenrandmib.co.za
WEBSITE : www.glenrandmib.co.za
ISSUED BY : TISH STEWART PR ASSOCIATES
CONTACT : Tish Stewart: 011 325 4195 / 082 443 6399
FAX NO : 011 325 4199
E-MAIL : tish@tspr.co.za
DATE : 13 October 2005
Date: 13/10/2005 02:08:05 PM Produced by the JSE SENS Department
