Firm to amend empowerment deal

THE R2.4 billion broad-based black economic empowerment (BBBEE) transaction that listed distribution group Barloworld implemented in 2008 is in trouble. Barloworld said this week that it proposed to amend the transaction to prevent its BBBEE partners from losing any value created by the transaction, including their initial equity contribution. The transaction involved six strategic black partners and three community service groups and is scheduled to mature in September. Barloworld said the 2008 transaction was implemented just prior to the impact of the global financial crisis on South Africa resulted in a decline in the group’s share price, resulting in lower-than-expected dividends to the BBBEE participants during the term of the transaction. The group said it was unlikely the BBBEE participants or their funding special purpose vehicle (SBV) would be able to finance the subscription of all the Barloworld ordinary shares that they were obliged to subscribe for on or before August 31. Barloworld said its board believed that if the group were to enforce its rights to claim specific performance from the funding SBV, any value created by the transaction would be lost. The proposed amendments are regarded as material and require shareholder approval. Full details of the amendments will be issued tomorrow. Stephen Meintjes, an analyst at Imara SP Reid, said it seemed that the dividends accumulated since the original scheme in 2008 were insufficient to achieve the intended levels of BEE, resulting in Barloworld deciding “on a supplementary scheme to facilitate their attainment”. – Roy Cokayne

ADRENNA PROPERTY