Industrial group Barloworld is optimistic that qualifying black South Africans will respond positively to its offer to buy a maximum of 30% of the shares available in a new black-owned property company, called Khula Sizwe Property Holdings, being created as part of a larger R3.5-billion broad-based black economic empowerment (BBBEE) transaction.
The property component of the transaction involves the sale by Barloworld of 68 mostly industrial properties across South Africa to Khula Sizwe. The transaction will also be accompanied by a ten-year triple-net lease with Barloworld South Africa and Barloworld Logistics, escalating at 8% a year.
The property portfolio has been valued independently at R2.9-billion, but will be sold to Khula Sizwe at a 5% (R143-million) discount, or R2.7-billion.
The transaction is being funded through a combination of R2.2-billion in debt, being provided by Nedbank, and R535-million in equity, R163-million, or 30%, of which has been allocated to the ‘black public scheme’. The 70% balance will be raised from a management trust (R207-million) and an employee trust (R174-million).
Group executive of insurance and risk Lesibana Ledwaba tells Engineering News Online that the public scheme opened to qualifying black South Africans – defined as Africans, Coloureds and Indians – at 9:00 on April 10 and will close at on 16:00 on May 31.
Applications for shares can be completed online, but a call centre and walk-in facilities have also been established to facilitate subscriptions.
Ledwaba stresses, however, that no racial restrictions have been set for the equity being acquired by management and employees. About 14 000 Barloworld employees and management will participate as shareholders in Khula Sizwe.
A maximum of 16 340 000 Khula Sizwe shares, to be issued at R10 apiece, has been made available for the public offer, with the minimum subscription amount set at R2 500, or 250 shares.
Tamela Holdings MD Tshepisho Makofane, who is advising Barloworld on the transaction, reports that no maximum threshold has been set, but that preference will be given to smaller subscribers in the event of oversubscription.
All Khula Sizwe shareholders, including those participating in the public scheme, will be subject to a five-year lock-in period from the implementation date, currently scheduled to commence on October 1.
Ledwaba says the aim of the transaction is to create a substantial new black-owned property company, which, following the lock-up period, will be listed for trade on the BBBEE segment of a stock exchange.
A new independent board and executive team are in the process of being assembled and a CEO will be appointed ahead of the implementation dated for the Khula Sizwe transaction.
Besides the property component of the deal, Barloworld has also announced its intention to issue 3% of its total issued share capital to the Barloworld Empowerment Foundation Trust, which will support various worthy causes focusing on poverty alleviation, education and youth development.
POSSIBLE CHANGES TO TREATMENT OF TRUSTS?
Ledwaba and Makofane insist that the foundation is being established in full compliance with the existing rules governing BBBEE trusts, but have noted recent statements by the Black Economic Empowerment Commission indicating that some trusts might not be passing the “ownership test” and could be considered to be “fronting”.
Business Day quoted BBBEE commissioner Zodwa Ntuli as stating that trusts could only meet the ownership test if shareholders were clearly identifiable and able to exercise voting rights; and if beneficiaries received the same economic benefits as all other shareholders and became unencumbered owners of the shares in which they were invested.
Makofane tells Engineering News Online that both Tamela and Barloworld are paying close attention to any possible changes to the way trusts are treated under the ownership component of the BBBEE scorecard and will also participate in any public process that may be established to review the current rules.
Ledwaba, meanwhile, stresses the potential for the foundation to make a positive impact on society. He notes that had the trust been established at the time when Barloworld declared a dividend for the second half of its 2018 financial year, the foundation would have received R20-million in dividend payments for that interim period alone.