Listed diversified black economic empowerment (BEE) company Mvelaphanda Group (Mvela) will acquire a further effective 2,47% stake in banking group Absa, the company said on Wednesday.
This follows an agreement with Mvelaphanda Holdings and BEE group Batho Bonke in which Mvela will purchase a further effective 24,7% interest in Batho Bonke from Mvelaphanda Holdings.
Following the acquisition, Mvela’s effective interest in Batho Bonke will increase to 44,7%, equivalent to an effective 4,47% interest in Absa.
Mvela will pay R25,55 per Batho Bonke share, amounting to a total of R461-million for the stake.
Mvela will finance the acquisition through a combination of Mvela shares and a cash amount of R190-million, the group said. Mvela Holdings, via a voting pool agreement with the other sellers of Batho Bonke, will now control an additional 33,9-million Mvela shares (8%), further enhancing Mvela’s BEE credentials.
Also on Wednesday, Mvela announced it plans to raise between R500-million and R600-million through the issue and placing of convertible, perpetual, cumulative preference shares. Standard Bank will manage and underwrite the capital raising, which is expected to take place in October.
Commenting on the acquisition, Mvela CEO Stephen Levenberg said a core focus of Mvela is to act as a consolidator of BEE transactions, whereby Mvela acquires interests held in South African corporates by smaller BEE entities in exchange for cash and/or shares.
“This acquisition demonstrates an important aspect of the Mvela model in practice. It allows Mvela to increase its interest in a quality company, in this case Absa, while increasing the broad-based BEE shareholding in Mvela and contributing to empowerment by realising value for the smaller BEE entities.
“In this sense, the transaction is an empowerment milestone because it provides an immediate redistributive element for broad-based groups and individuals,” Levenberg said.
At the time of the merger between Mvela Holdings and Rebserve Holdings to form Mvela in December last year, Mvela acquired a 20% interest in Batho Bonke. Following Wednesday’s acquisition, Mvela’s effective interest in Batho Bonke will increase to 44,7%, equivalent to a 4,47% interest in Absa.
“The acquisition by Barclays of a controlling stake in Absa, together with a rerating of the banking sector, has resulted in Absa becoming a more valuable and material asset to Mvela,” said Levenberg.
“We believe the prospects of Absa as a long-term investment, especially under the control of Barclays, are attractive. We are pleased to increase our leveraged investment exposure to Absa through the acquisition of a further interest in Batho Bonke.”
He said relative to the market values of Mvela shares and the Batho Bonke shares that are directly correlated to the prevailing Absa share price, the purchase price represents a total discount of 30%.
The acquisition will boost Mvela’s intrinsic net asset value by 5% to R9,16 per share. In addition, the pro forma financial effects are to increase Mvela’s earnings per share by 29,6%, headline earnings per share by 26%, net asset value per share by 7,7% and tangible net asset value per share by 12,5%.
Executive chairperson Tokyo Sexwale said the proceeds of the capital raising will be used to capitalise on Mvela’s pre-eminent position as a major black-owned, -controlled and -managed company capable of anchoring and funding significant broad-based BEE transactions.
He noted that, similar to the Absa deal unveiled on Wednesday, in certain Mvela investments (specifically Life Healthcare Group) options currently vest in favour of Mvela, as part of a BEE consortium, to increase its stake.
“We think it opportune to raise the capital to enable us to follow our rights and to seize on additional opportunities that are continually presented to a group of this nature,” Sexwale said.
Levenberg concluded by noting that opportunities also exist to expand Mvela’s operating businesses, particularly in the facilities-management division where large contracts require substantial capital investment on inception. — I-Net Bridge