The strategic black economic empowerment (BEE) partnership between listed financial services group Metropolitan and black-owned investment group Kagiso Trust Investments, details of which were announced in June, has been officially finalised with the transfer of both shares and money on the part of both partners.
In a deal that has been hailed as one of a kind by local and international commentators, Metropolitan issued 76-million new five-year convertible preference shares to Kagiso on October 1, and received R540-million in cash in exchange.
The preference shares are convertible into ordinary shares on a one-for-one basis in years four and five.
Kagiso funded the acquisition of the stake, representing just more than 10% of Metropolitan’s total issued share capital, via a capital investment of R30-million and financing of R510-million. The latter was provided by a consortium of banks on commercial terms.
“As far as we are aware, this is the first fully funded empowerment transaction of substance to have come to fruition in South Africa,” said Metropolitan CEO Peter Doyle.
“As management, we are confident that any resultant dilution in the value of the group in the short term is a small price to pay for the long-term benefits of the partnership, and our shareholders are clearly of the same mind as their vote was 99,75% in favour of it.”
Eric Molobi and Johnson Njeke, respectively executive chairperson and managing director of Kagiso, said they were equally well satisfied with what they stand to gain in return for the money they have put on the table.
“Kagiso already has full economic and voting rights in respect of the preference shares,” observed Njeke.
“However, the half-yearly dividend payable to us will be increased if we help Metropolitan meet certain pre-determined quantitative performance measures and we ourselves contribute in line with qualitative deliverables, agreed with in advance with Metropolitan.”
As Molobi points out, “the deal is structured in such a way that we will, provided we help Metropolitan exceed the targeted growth rate, own a substantial stake in the group, debt free, in the foreseeable future”.
According to Doyle, Kagiso’s strategic involvement with Metropolitan has already been significant, with the Kagiso representatives making their presence felt both at board level and in the various sub-committees. The pace of their operational input was picking up as the partnership bedded down.
Metropolitan now has direct black ownership of 14,5% (with an additional 4,5% coming from ownership by its black staff) and estimated indirect black ownership of another 12,5% via policyholders and retirement-fund members. This means that it currently exceeds the Financial Sector Charter’s overall black ownership target for 2010 of 25%. — I-Net Bridge