Busy executives in ‘productive discussions’
THE FACT EMPOWERMENT consortium Batho Bonke and Mvelaphanda Group have now less than three months to secure R1,6bn funding after five years of trying is either due to the busy schedules of its leaders or the unsustainability of the current form of black economic empowerment. Or both.
After Batho Bonke – in which Mvela owns 44,7% – entered into a transaction to buy 10% of Absa in 2004, it bought preference shares at a strike price of 200c each and had five years to raise the funding to swap them for ordinary shares.
Mvela’s four executive directors share at least 12 directorships between them. The young CE, Yolanda Cuba, sits on the boards of Absa and Steinhoff. Former chairman and now Cabinet Minister Tokyo Sexwale sat on 13 boards while still at Mvela. Among his board seats were the Montfort University in Britain, TransHex and Northam Platinum in South Africa, in addition to the consortium. In addition, Sexwale spent the past two years running for political office.
Mvela faces losing half the R1,6bn “back-up” funding facility advanced by Absa if it fails to raise alternative funding in the market by 1 September. Should Batho Bonke fail to arrange the funding by that date, Absa will convert the economic return on the outstanding R1,6bn “to the full economic return on a specified number of Absa shares under a share buyback transaction on the funding date of 1 June”.
Batho Bonke will then apply the profit to subscribe for the balance of the 73,2m Absa shares it agreed to buy in 2004. It’s taken delivery of half the shares – 36,6m – for a net R817m after Absa bought back the same number of preference shares and Mvela used the proceeds to buy ordinary shares.
Under a pre-agreed formula Absa will buy the remaining preference shares held by Mvela for R1,06bn – instead of advancing the back-up facility. Financing costs on that will shave off almost R200m. The consortium has said it’s in “productive discussions with various” institutions regarding the funding. Cuba has failed to return several calls regarding the matter.
Racing against time. Yolanda Cuba