The wide-ranging black economic empowerment (BEE) transactions unveiled on Tuesday by Old Mutual involving the sale of an overall 12,75% stake in its South African operations — Old Mutual South Africa, Nedcor and Mutual & Federal — to BEE participants will be the “full arrangements” that will be made by the group in terms of BEE ownership, according to group CEO Jim Sutcliffe.
Speaking with journalists following the announcement of the deal on Tuesday, Sutcliffe confirmed that no further empowerment stakes will be sold by the Old Mutual group, but added that the company continues to engage in many empowerment-related projects.
“Empowerment is not just about ownership — there are things like funding of BEE transactions, outsourcing et cetera that we continue to do on an ongoing basis to enhance empowerment,” he noted.
The group chose to sell more than the 10% stake required by the Financial Services Charter to its BEE partners because, the CEO explained, rather than being dictated to by the charter, Old Mutual had compared the value to be added by the transaction with the costs, which had resulted in equity levels exceeding the 10% minimum.
Sutcliffe said Old Mutual spoke with “tens” of potential BEE partner companies in the two years it was developing its BEE transaction, as well as with the government. The final partners — Wiphold and Brimstone, among others — were chosen according to strict criteria imposed by the board. The Department of Trade and Industry on Tuesday morning endorsed the final agreement in principle, he noted.
The transaction, he noted, is a catalyst that will “reshape the group’s businesses in South Africa”, as well as a “very broad arrangement” and a very commercially oriented deal that brings together the interests of all partners, providing measurable performance criteria and rewards.
Sutcliffe pointed out that more than 500 000 black participants across South Africa will be affected by the sale of the shares of Old Mutual, Nedcor and Mutual & Federal, with a total value of R7,2-billion.
Of the total new shares, 39% will go to employees and management, 27% to clients and distributors, 24% to the groups’ new BEE partners and 10% to communities across the country.
Funding for the transactions will be internal, Sutcliffe confirmed, with the new BEE partners paying a small amount upfront and deferred payments to be made over a 10-year period. The interest rate to be paid is approximately 8,16% on a risk-free basis, which could vary up or down by 1,5% depending on performance.
New board members will be nominated for each company, including Wiphold director Gloria Serobe to the boards of Old Mutual and Nedcor; Mustaq Brey of Brimstone and Reuel Khoza of AKA Capital to the board of Nedcor; and Louisa Majola of Wiphold and Bulelani Ngcuka, chairperson of Chestnut Hill, to the board of Mutual & Federal. — I-Net Bridge