Sun­set clause

Busy ex­ec­u­tives in ‘pro­duc­tive dis­cus­sions’

Finweek English Edition - - Companies & Markets - SIKONATHI MANTSHANTSHA sikonathim@fin­

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

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