South African banking group FirstRand announced on Thursday that black economic empowerment (BEE) groupings will acquire 10% of the group.
A binding memorandum of understanding has been entered into with BEE partners and discussions with a number of third-party funders are at an advanced stage, it said.
The transaction will be funded through a combination of vendor and third-party funding.
At current market prices, the BEE transaction has a value of about R6,8-billion, making it one of the largest broad-based BEE transactions to date in South Africa.
FirstRand said the transaction comprises two components, namely:
Broad-based BEE groups (“the BEE partners”) will be the beneficial owners of 6,5% of FirstRand’s issued ordinary share capital, such shares to be held via the FirstRand Empowerment Trust, a trust to be created for the purposes of the BEE transaction; and
FirstRand’s black South African staff and non-executive directors will have a beneficial interest in 3,5% of FirstRand’s issued ordinary share capital.
“To give effect to the BEE transaction, approximately 7,6% of FirstRand’s issued ordinary shares will need to be procured from existing shareholders. This will be implemented by proposing a scheme of arrangement in terms of Section 311 of the Companies Act (Act 61 of 1973), as amended, between FirstRand and its ordinary shareholders (‘the scheme’).
“A total of 418,3-million shares (‘the scheme shares’) will be procured on a pro rata basis from existing ordinary shareholders in terms of the scheme.
“In addition, to facilitate the BEE transaction and ensure its sustainability, FirstRand plans to issue approximately 120-million FirstRand ordinary shares to the FirstRand Empowerment Trust at the par value thereof.
“This aspect of the BEE transaction will lead to a dilution of approximately 2,1% for FirstRand shareholders,” the banking group — one of South Africa’s so-called “big four” — said.
It said given its international operations, the deal constitutes more than 10% of the group’s South African operations. — I-Net Bridge