Health and life insurance group Discovery Holdings on Tuesday announced the conclusion of a strategic black economic empowerment (BEE) transaction that result in new black partners gaining 7% of the group.
This will bring Discovery’s total BEE shareholding, after accounting for the BEE shareholding in FirstRand, Discovery’s parent group, to just more than 25%. This is in line with the requirements of the Financial Services Charter.
Discovery employees will receive a total of 5 390 000 shares in Discovery, which will vest in varying periods, depending on employees’ level of seniority, starting in two years’ time.
“We value people as our greatest asset, and we want to reward the contribution of our employees and recognise and encourage the contribution of black talent within Discovery,” says Adrian Gore, CEO of Discovery.
“Further, we want to achieve true broad-based empowerment and we want to be involved with innovative and entrepreneurial partners who can contribute to Discovery’s growth,” Gore says.
At least 3% of Discovery’s shareholding will rest with WDB Investment Holdings (WDB), the investment arm of the group that generates income to be ploughed into the economic empowerment and upliftment of black, rural-based women.
“WDB is a shareholder with an institutional perspective, providing strategic guidance while acknowledging that operational issues rest in the hands of the Discovery management team,” he says.
WDB is also an entrepreneurial entity that understands that its investment in Discovery is for the long haul.
“WDB has insight into the social issues which are facing our sector. They bring to Discovery this unique experience,” Gore says.
Gore adds that WDB offers Discovery the broad-based ownership that it desires, particularly with its emphasis on the upliftment of rural women.
WDB executive director Sonja Sebotsa, who has been nominated to serve as a non-executive member of the Discovery board, says: “WDB is very pleased to partner with a market leader such as Discovery.
“We look forward to working with Discovery’s management team as they unlock further growth in South Africa and offshore, including exploring growth opportunities in the lower income segments of our population.”
The BEE deal will also see the formation of the Discovery Foundation to invest in the education and training of black medical specialists in areas of need.
The intention is to have focused and significant impact in an area of critical need in the health sector. The foundation will be capitalised through a combination of Discovery shares and initial operating capital, giving it access to between R100-million and R200-million over a period of 10 years.
Prominent businessman Dr Vincent Maphai, who is chairperson of BHP Billiton South Africa, will chair the Discovery Foundation and become a shareholder. He has been nominated to join Discovery’s board as non-executive director.
Maphai says: “Discovery is a very successful company. It has the guts to change the rules of the game, has a strong management team and an unyielding desire to win. I respect the company and its leadership enormously. I am proud to be joining such a company.
“We, WDB and I, are here to supplement each other with the leadership of this company. We are not here to replace each other. I am looking forward to that.”
Gore says Maphai will add considerable gravitas and experience to the Discovery board and as a shareholder.
“Vincent’s statesmanlike skills and experience will add considerably to Discovery’s skill base,” says Gore.
Gore says the decision to structure the shareholding in this way and partner with WDB as its institutional BEE shareholder followed a rigorous process of selection.
Importantly, the entire transaction will be at holdings level, rather than at subsidiary level. This, says Gore, will mean that the empowerment shareholders will share in the full upside and risk of Discovery, and it aligns all shareholders.
“We feel this is a cleaner way of putting together a BEE deal,” says Gore. “Our businesses are closely integrated, and in this way our BEE partners share the risk as well as the upside in all of our operations, including in the United States and United Kingdom.”
Gore says, however, that the shareholding issue is only one aspect of Discovery’s transformation drive.
“Discovery has made significant progress in meeting the other aspects of the Financial Services Charter, including employment equity and procurement,” he says. — I-Net Bridge