JOHANNESBURG (miningweekly.com) – Diversified miner Exxaro Resources will put in place a new black economic empowerment (BEE) scheme once the unwinding of its existing BEE agreement has been completed.

Since its establishment in 2006, Exxaro’s BEE partner has been Main Street 333 (MS333), which owns 50.19% of the issued ordinary shares of Exxaro. In terms of the existing BEE transaction, MS333 was obliged to own more than 50% of Exxaro’s shares up to November 28.

Further, direct and indirect shareholders of MS333 undertook to retain their status as historically disadvantaged South Africans (HDSAs), as defined in the Mineral and Petroleum Resources Development Act (MPRDA).

After November 28, MS333 must distribute its shareholding in Exxaro to its shareholders in exchange for each shareholder’s shares in and claims against MS333. The MS333 unwinding offering must then be procured by the shareholders of MS333 as soon as possible after the November 28 deadline.

On Tuesday, Exxaro, led by CEO Mxolisi Mgojo, announced that it would coordinate the MS333 unwinding by replacing the existing BEE transaction and establishing a share repurchase implementation agreement.

Exxaro, MS333 and the MS333 shareholders have agreed “high-level terms” governing the replacement BEE transaction. It is their intention to implement the replacement BEE transaction after Exxaro repurchases and cancels a certain number of Exxaro shares to the value of R3.5-billion from MS333, partially using the mechanism of the MS333 unwinding to enable direct and indirect shareholders of MS333 to reinvest into the replacement BEE transaction structure.

Further, Exxaro stated that, while high-level terms have been agreed with MS333, detailed transaction agreements required to implement the replacement BEE transaction are still to be negotiated and finalised.

STRUCTURE OF NEW BEE DEAL
The diversified miner highlighted that the replacement BEE transaction would be incorporated for the purpose of being the new empowerment vehicle for Exxaro. “It is our intention that the new BEE entity will ultimately own 30% of Exxaro’s shares.”

The company stated that all of the existing direct and indirect shareholders of MS333, excluding the Industrial Development Corporation (IDC), will be invited to participate in the replacement BEE transaction by reinvesting all or some of the Exxaro shares received as part of the MS333 unwinding.

The IDC, which currently owns about 15% of the ordinary shares of MS333, has, however, separately agreed to reinvest in the replacement BEE transaction by investing some of the Exxaro shares received as part of the MS333 unwinding.

Exxaro revealed that the new BEE structure will have two shareholders, namely a newly formed special purpose vehicle (BEE SPV) to house the MS333 reinvestment and the IDC. The BEE SPV will own 75.8% and the IDC will own 24.2% of the new BEE entity.

Moreover, Exxaro said it would invest equity into the BEE SPV to provide funding for the reinvesting MS333 shareholders, who will have outright control of the new BEE entity and 30% BEE ownership in Exxaro will be achieved. The BEE SPV shareholders will be reinvesting MS333 shareholders and Exxaro, with reinvesting MS333 shareholders owning 62.3% and Exxaro owning 37.7% of BEE SPV.

In addition to the equity funding introduced into the replacement BEE transaction through the MS333 reinvestment, the IDC reinvestment and the Exxaro equity investment, Exxaro will provide facilitation, in a form still to be agreed, to the replacement BEE transaction.

The balance of funds required by the new BEE structure to invest into Exxaro pursuant to the replacement BEE transaction will be raised through third-party bank funding. The IDC has also agreed to provide a debt guarantee in favour of the third-party funders up to a maximum value of the present value of R7-billion over the term of the replacement BEE transaction.