African Rainbow Capital tables offer to acquire an 18.36% minority stake in Afrimat

Offer to buy 18.36% of listed group’s share capital

AFRICAN Rainbow Capital (ARC), which was founded by prominent businessman and billionaire Patrice Motsepe, has made an offer to acquire a significant minority stake in listed open-pit mining group and industrial minerals and construction materials supplier Afrimat.

Afrimat said on Friday that ARC had offered to purchase 26.3 million shares in Afrimat, which comprises about 18.36 percent of the share capital in the company, from Afrimat Empowerment Investments (AEI).

The purchase of Afrimat shares by ARC will facilitate the settlement of all debt outstanding in relation to the Afrimat shares held by AEI and the distribution of the economic benefits under the current scheme to its participants, who are all black employees. AEI became one of Afrimat’s black economic empowerment (BEE) partners in 2009.

Andries van Heerden, the chief executive of Afrimat, said they believed the proposed deal would create a long-term and sustainable BEE partner with certainty around shareholding, which would build further value for Afrimat.

BEE partner

“ARC has also shown a willingness in wanting to work with Afrimat on our proposed growth strategy,” Van Heerden said.

ARC is a fully black-owned and controlled investment company and a subsidiary of Sanlam’s empowerment partner Ubuntu-Botho Investments. It is jointly headed by former Sanlam Investments chief executive Johan van der Merwe and former Sanlam chief executive Johan van Zyl.

They invest in businesses that can grow organically or acquisitively and ARC can enable and accelerate this growth by providing funding where necessary.

Afrimat said ARC had agreed to be locked in for at least four years on successful conclusion of the purchase of the Afrimat shares.

The company stressed ARC was a strategic long-term investor in the group and did not have any predefined exit strategy.

The transaction is subject to a number of conditions precedent, including approval of the offer by the participants of the Afrimat BEE Trust.

To facilitate the purchase of Afrimat shares by ARC, the current trust deed of the Afrimat BEE Trust is being amended. These changes will be sent to Afrimat shareholders in a circular and will also be provided to scheme participants for approval.

Unlucky before

Afrimat has not been particularly lucky with its BEE transactions, with two planned empowerment transactions previously collapsing because of the global financial crisis.

A consortium led by Mvelaphanda Holdings (Mvela) was given options in 2008 to purchase up to 27.8 million shares over three years, which would have increased Afrimat’s BEE shareholding above the mining charter’s 26 percent threshold, but this proposed transaction collapsed at the beginning of 2009.

Kwezi Mining, another black shareholder, breached its contract, resulting in Afrimat buying back the 7.2 million shares Kwezi held. The collapse of these two proposed transactions led to the deal with AEI in September 2009.

In terms of the transaction with AEI, it agreed to acquire 13.2 million Afrimat shares that were previously held by Mega Oils, one of the company’s BEE shareholders, for R35.9m, or R2.72 a share.

AEI had also subscribed for 9.5 million new shares for R27.07m, or R2.85 a share.

This transaction provided Afrimat with a long-term solution to its BEE requirements and enabled it to convert its old order mining rights to new order rights. Shares in Afrimat rose 5.39 percent on Friday to close at R24.24.