Old Mutual to boost its BEE with a new broad-based R2.8bn scheme

OLD MUTUAL has announced a R2.8 billion broad-based black economic empowerment ownership scheme named Bula Tsela, to its staff and the black public, which will take its BBBEE ownership to more than 30 percent.

The transaction would result in an approximate 4 percent increase in the BBBEE shareholding in Old Mutual, a statement from the 177-year-old life assurance and financial services group said yesterday. When Old Mutual did its “managed separation” from its former UK base and operations in 2018, it made a commitment to the Department of Trade, Industry and Competition to achieve a B-BBEE ownership percentage of at least 25 percent by June 2021, which was achieved.

It also committed to be best in class (measured at that time) within five years or by June 2023, which would have required its BBBEE shareholding to exceed 30 percent.

The Bula Tsela (Sesotho for “open” or “pave the way”) transaction would exceed the 30 percent target, Old Mutual said in a statement yesterday. The deal will be done by issuing some 205.3 million new Old Mutual ordinary shares for cash, which constitutes about 4.36 percent of the share capital. This will be financed by notional and actual funding from the group and its subsidiaries.

The employee share ownership trusts (Esop Trusts) will hold about 1.6 percent of Old Mutual’s share capital after the transaction.

Meanwhile, a special purpose vehicle (RetailCo) will be created where black members of the public can subscribe for ordinary shares – this vehicle will in turn hold about 1.29 percent of Old Mutual’s shares.

The group expects that the shares in RetailCo will be listed on a broad based black economic empowerment exchange within five years – these shares will not be tradeable until then.

In addition, a community trust will hold about 1.29 percent of Old Mutual’s share capital, for black community beneficiaries.

The Esop scheme would be open to all employees, but a disproportionate allocation of awards would be made towards achieving transformation objectives, including to black South African employees at lower job grade levels.

Vesting will entitle employees to take transfer of the Esop Old Mutual Shares after a 10-year lock-in period.

Allocations of shares in RetailCo would be tilted towards qualifying black women and other broad-based criteria still to be determined. A minimum of 200 shares at a total subscription price of R2 000, payable upfront could be applied for in RetailCo, or a minimum of 100 shares, with the R1 000 payable over a 12-month term.

Meanwhile, Old Mutual’s share price traded 1.54 percent lower at R12.14 on the JSE yesterday.