Basil Read share placement imminent
Basil Read will soon disclose the potential private placement of shares that will result in it becoming a black-owned company as soon as this can be done. It is among seven JSE-listed construction groups to reach a voluntary settlement agreement, also known as the Voluntary Rebuild Programme, with the government to transform the industry.
“We are trying to do as commercial a deal as is possible,” Basil Read CEO Neville Nicolau says. This means any black investor will have to make an equity placement and take risks at board, executive management and operational level.
“We have not pursued any vendor-financed deals, although we get offers all the time,” Nicolau says. The intention of any deal is to take black shareholding in Basil Read on the JSE past 51%, he says.
This is well above an agreement to sell not less than a 40% economic interest in its South African civil engineering and general building construction business to an enterprise that is more than 51% black-owned, managed and controlled.
“We are trying to go a step further,” Nicolau says. “We have discussed this with a few potential investors and have progressed well in some of these discussions,” he says.
The group has six months to complete a deal after the end of February 2017. There is a “whole regulatory process to go through”, he says.
Meanwhile, Basil Read has dismissed as “without merit” claims made in March by Black Business Council in the Built Environment (BBCBE) secretarygeneral Gregory Mofokeng that the group was “unco-operative and recalcitrant”.
This came after the BBCBE said that its role as an “architect” of the settlement programme had been diluted. “Basil Read must know that we will oppose any transaction that will not meet our demands. We urge them to come to the negotiation table now before seeking shareholder approval and announcing their transaction to the market,” the BBCBE said.
However, Nicolau says this has now been cleared up with the BBCBE. Basil Read chose to sell a majority stake in the business, he says, rather than mentor two emerging contractors up to the point that they generate a cumulative combined annual turnover over seven years equal to at least 25% of the mentor’s yearly civil engineering and general building turnover in SA.
Aligned to this latter “obligation” in the settlement agreement with the government are fixed interim-period transformation targets for construction companies, with penalties calculated as a percentage of turnover for a failure to meet such targets.
“The consequences of not reaching these targets are severe,” Nicolau says.
The settlement agreement comes as former finance minister Pravin Gordhan, in the medium-term budget statement in October 2016, promised to increase investment in infrastructure, projected at R987bn over the next three years.
WE HAVE NOT PURSUED ANY VENDOR-FINANCED DEALS, ALTHOUGH WE GET OFFERS ALL THE TIME
51% the minimum black shareholding on the JSE at which the company is aiming
R987bn the projected investment in infrastructure promised over the next three years