Human capital management and marketing advisory services firm Adcorp Holdings Limited on Tuesday announced a multi-million rand empowerment deal involving a consortium of Black Management Forum Investments Company (BMFI), the investment arm of the Black Management Forum (BMF) and Zungu Investments Company (ZICO), a black-owned investment holding company.
The deal involves the introduction of the empowerment consortium as 25% shareholders in the group’s flexible staffing division, which includes brands such as Quest Flexible Staffing Solutions, Emmanuels Staffing Services, Capacity, Charisma Nursing Services and Ikhwezi Staffing Solutions.
Adcorp CEO Richard Pike said the new empowerment business, which is the largest division of Adcorp contributing some 65% of operating profits, is to be known as Adcorp Flexible Staffing Solutions.
Pike said the transaction has been made possible by way of an innovative structure enabling the empowerment partners to participate in the fruits of their endeavours from the first year, with an option to convert their investment in Adcorp Flexible Staffing Solutions directly into the Adcorp listed entity after a five-year period.
BMF president Bheki Sibiya will represent the ZICO-BMFI consortium on the Adcorp Holdings Board, with executive director of ZICO Bonga Zungu, serving as alternate director to Sibiya.
“The agreement significantly enhances the empowerment profile of Adcorp and could act as a model for other empowerment transactions. The transaction is unique in its structure and will benefit all existing shareholders of Adcorp,” Pike said.
Pike added that the flexible staffing division of Adcorp was a leader in black economic empowerment. It employs and trains over 18 000 people at any one time, the majority of whom are black. Quest recently appointed a black managing director, Francis Khubedu.
Sibiya would assume the position of chairperson while Bonga Zungu is to be appointed an executive director of Adcorp Flexible Staffing Solutions.
Nelis Swart remains as chief executive officer of the business.
The Adcorp Holdings Limited empowerment transaction has been effected by way of the sale of all of the flexible staffing businesses of Adcorp into a new entity, Adcorp Flexible Staffing Solutions, in which the empowerment consortium comprising BMFI and ZICO is to hold 25% of the shares while Adcorp will hold the other 75%.
A separate class of shares is to be issued to Adcorp in settlement of the purchase consideration of R320-million, which will entitle Adcorp to the pre deal or “base” profits of the business on an ongoing basis. A second class of shares enabling all profits in excess of the base profits derived by the business after the deal, to be known as the “super profits”, will be held 50% by the empowerment consortium and 50% by Adcorp.
“Adcorp’s dominant position in the South African human capital management market coupled with market entrée and expertise of both BMFI and ZICO, should provide excellent prospects for the division,” BMFI managing director Campbell Bomela said.
After a period of five years, the empowerment partners will have the opportunity of converting their stake in the empowered flexible staffing entity into the Adcorp Holdings listed entity on the basis of a “value-for-value” swap of their shareholding.
Pike said he was excited about the deal because no third party was involved in the financing of the deal.
He said the empowerment partners will be able to participate in the fruits of their endeavours right from the first year, as it is being funded internally by Adcorp while the flexible staffing division, already in a growth phase, should receive added impetus from its BEE credentials.
“As the base profits flow directly to Adcorp, there is no dilution of earnings for existing Adcorp shareholders. As such neither the current level of earnings of Adcorp nor the net asset value of Adcorp will be negatively affected by this transaction, which is effective1 August 2003,” Pike added.
The net asset value of the companies involved in the transaction was R102,1-million on June 30.
ZICO’s Zungu said: “We are extremely proud of our new partnership with Adcorp and BMFI and believe that this alliance will be hugely beneficial to all concerned.”
The deal is subject to Adcorp shareholder and applicable regulatory authority approval.
The Adcorp share price warmed to the news, adding 1,91% or 15 cents to R8. – I-Net Bridge