The reinvestment of Exxaro shares by MS333 shareholders, including the IDC, required to effect the replacement BEE transaction, is scheduled to be completed in Q4, 2017.Exxaro announced in November 2016 that its existing BEE structure with MS333 had elected to unwind its shareholding, necessitating the need for a new BEE transaction.
MS333 and the company have elected to continue their relationship, but under a new structure.
Salient features of the replacement BEE transaction
Exxaro and MS333 have agreed that the company will repurchase 22 684 767 Exxaro shares from MS333 at a 5% discount to the reference price, still to be determined, as part of the implementation of the Replacement BEE Transaction, in order to reduce its dilutionary impact, subject to shareholder approval. The Second Repurchase will only be implemented on the final implementation date and will be conditional on the Replacement BEE Transaction being approved and implemented.
A new special purpose vehicle, incorporated for the purpose of being the empowerment vehicle which will hold shares, will ultimately own 30% of the shares, after the implementation of the Replacement BEE Transaction. This 30% will be acquired as follows:
- Certain MS333 direct and/or indirect shareholders, excluding the IDC will reinvest a minimum of 26 623 276 Exxaro shares into New BEECo through a separately incorporated special purpose vehicle;
- the IDC will reinvest 12 337 616 Exxaro shares; and
- New BEECo will subscribe for additional Exxaro shares at an agreed discount which will be equal to 22.6% of the Replacement BEE Transaction value, using the cash raised as described in paragraph
The net dilution to shareholders, after the implementation of the Second Repurchase and the Replacement BEE Transaction, will be 7.4%, based on the Exxaro value per share.
Rationale for the replacement BEE transaction
Since inception, Exxaro has maintained its status as one of the largest black controlled companies in the South African mining sector. Exxaro is aware of the current uncertainty around the legislative requirements for BEE in the South African mining sector.
However, the independent sub-committee of the Exxaro board of directors firmly believes that Exxaro’s empowerment status and ownership is a significant part of its strategy and is an imperative for the sustainability of Exxaro’s operations.
Remaining empowered is essential for the company to maintain sustainable relationships with critical stakeholders in the industry and to ensure on-going compliance with customer requirements, as well as to further the imperative for transformation in South Africa.
The recent release of the Reviewed Broad-Based Black Economic Empowerment Charter for the South African Mining and Minerals Industry has created increased uncertainty for South African mining companies.
However, as the company has been pursuing the Replacement BEE Transaction for more than 18 months, it firmly believes the implementation of the Replacement BEE Transaction to be appropriate as it will further contribute to transformation in the South African mining industry in a responsible manner.
Feature image credit: Exxaro