World number-one diamond miner De Beers on Tuesday announced that it has sold 26% of its South African operations — De Beers Consolidated Mines (DBCM) — for R3,8-billion to a newly created black economic empowerment (BEE) entity called Ponahalo.
Ponahalo will be jointly owned by Ponahalo Investment Holdings and De Beers’s South African-based employees and pensioners.
Ponahalo’s chairperson, Manne Dipico, will be appointed deputy chairperson of DBCM and serve on DBCM’s executive committee. Two other Ponahalo nominees will be appointed to the board of directors.
The ultimate shareholders of Ponahalo Investment Holdings are Dipico, the chairperson of both Ponahalo Investment Holdings and Ponahalo, and a former premier of the Northern Cape province; Peotona Capital, a women’s investment company owned by Cheryl Carolus, Dolly Mokgatle, Wendy Lucas-Bull and Thandi Orleyn; Barend Petersen; Moss Mashishi; and three broad-based trusts — a trust for disadvantaged women; a trust for people with disabilities; and a trust for communities around DBCM’s mines.
Ponahalo will be actively involved in the management and strategic direction of DBCM.
The cash consideration to be paid by Ponahalo will be financed by a combination of equity contributed by certain Ponahalo shareholders, third-party financing and vendor finance provided by De Beers.
The purchase price has been agreed at approximately R3,8-billion and is subject to the finalisation of certain valuation parameters and due diligence by Ponahalo and its advisers.
Ponahalo has appointed Rand Merchant Bank (RMB) and Bowman Gilfillan Attorneys to provide it with independent financial and legal advice. In this respect, RMB has advised Ponahalo that, subject to finalisation of the valuation parameters and due diligence, the purchase price reflects fair value for the equity interest.
De Beers and Ponahalo said they believe that the transaction will comply fully with the ownership requirements of the Mining Charter, given that it will result in Ponahalo acquiring a 26% equity interest in DBCM, thereby exceeding the 2009 Mining Charter target and complying immediately with the 2014 Mining Charter target.
Moreover, 90% of Ponahalo being owned by historically disadvantaged South Africans would thereby meet the “majority” HDSA-owned [historically disadvantaged South Africans] and -controlled requirements of the Mining Charter.
De Beers said that a further announcement will be made by the parties following the signing of the relevant financing and other transaction agreements. This further announcement will provide details of the Ponahalo financing arrangements and the financial impact of the transaction on the De Beers group, which is not material, it said.
The deal is subject to approval of South African Reserve Bank, regulatory authorities and the financing being raised by Ponahalo.
The final terms of the transaction will be subject to the finalisation of the proposed amendments to the Diamonds Act and an assessment by De Beers and Ponahalo of the impact of these amendments on DBCM’s business, as well as certain other potential value-adjustment items that the parties may identify.
Nicky Oppenheimer, De Beers chairperson, said: “The transaction recognises the significant contribution that De Beers employees and pensioners have made to our South African business as well as the contribution and added value that Manne Dipico and his consortium of business partners, including a highly regarded group of businesswomen, will bring to our South African business going forward.”
Dipico said Ponahalo will play a valuable role in supporting transformation in DBCM, creating significant wealth for its shareholders and beneficiaries and generally adding value to the wider South African economy.
Ponahalo will use R10-million, escalating at 5% a year, of its dividend income each year, or more than R100-million in aggregate over the first 10 years, to make other investments in South Africa. It will also set aside R5-million each year, or R50-million in aggregate over the first 10 years, which will flow directly through to trusts for the benefit of disadvantaged women, people with disabilities and communities around DBCM’s mines.
Over the first 10 years, the balance of Ponahalo’s dividend income will be used for debt service. — I-Net Bridge