Black economic empowerment company Makana Financial Services is to acquire a 10% strategic investment in listed South African specialist financial services group Cadiz Holdings for R41-million.
In terms of the agreement, the details of which were announced on Tuesday, Makana will acquire 23,509-million Cadiz shares from the Cadiz Holdings Employee Share Trust (Chest) and from Cadiz Management Services, a wholly-owned subsidiary of Cadiz, for a total consideration of R41-million, which amounts to an average cost of 175 cents per Cadiz share.
Cadiz has also earmarked an additional effective 10% of its issued share capital to be issued to current and future black employees over the next five years with the intention of attracting and retaining these employees.
The result is that both Makana — immediately — and black employees — in the course of time — will hold 10% each.
The group said it is envisaged that the transaction will materially and sustainably transform Cadiz into an entity that has the profile and capacity to successfully deliver quality services to all segments of the South African business community, including corporate, government, institutional and state owned enterprises clients, thereby facilitating growth in earnings and shareholder value on an ongoing basis.
Makana will assist in championing transformation within Cadiz, specifically with regard to issues such as employment equity, affirmative procurement and in attracting and retaining high quality black professionals.
The group added that the transaction demonstrates not only its continuing commitment to growing its business in South Africa, but also its commitment to meaningful transformation at all levels of the business.
Chest currently holds unallocated shares, which the JSE has required it to dispose of. These shares, together with the treasury shares held in CMS, are being used to facilitate the transaction.
Makana has been established for this transaction and is a 60% held subsidiary of Makana Investment Corporation (MIC). The other shareholders of Makana are Autshumatu (25%) and Wild Orchard (15%).
All the shareholders in Makana are black companies. MIC is 51% owned by the Makana Trust, with the balance owned by MIC management. The Makana Trust was formed in 1995, on the 5th anniversary of Nelson Mandela’s release, when former political prisoners gathered on Robben Island.
In his address to the former inmates former President Mandela remarked about the unsatisfactory economic state of most former political prisoners. He turned to his former co-accused Ahmed Kathrada to lead an initiative to address the plight of these people.
MIC has interests in Media, Transport & Logistics and Telecommunications. Subsequent to the Transaction, MIC will also have an interest in the financial sector.
As a result of the transaction, Peter-Paul Ngwenya has been nominated as the Makana representative on the board of Cadiz. Sfiso Buthelezi will be his alternate.
While Cadiz appreciates that the purchase price of 175 cents per share offered to Makana represents a substantial discount to the current Cadiz share price, it believes that the purchase price is reasonable given the requirements of the Charter, the fact that Makana will be unable to dispose of its Cadiz shares for a predefined period and the value that Makana will add to the Cadiz group of companies, it said.
The group said its board views the long-term benefits which Makana is likely to bring to Cadiz as significantly outweighing any dilution that may arise as a result of the Cadiz shares being sold to Makana at a discount to the current market value.
At 12h30 on the JSE Securities Exchange South Africa, Cadiz shares were quoted at 253 cents — up 3 cents from their previous close. – I-Net Bridge