JSE-listed cement and construction materials producer PPC has launched a PPC Employee Share Ownership Trust, which has acquired 10% of the share capital of PPC South Africa for the benefit of the employees of PPC’s subsidiaries operating in the country. The shares were bought for R380-million.

The trust seeks to recognise and reward the employees for the valuable role they play in PPC’s success and demonstrate the company’s commitment to achieving South Africa’s equity ownership targets.

The trust has been structured with the objective of providing an opportunity for qualifying employees to benefit for the duration of their employment and replaces previous equity ownership schemes which have since been unwound, PPC said in an August 7 statement.

All South African employees not currently participating in PPC’s long-term incentive programme will be eligible although participation will be weighted in favour of historically disadvantaged individuals, in line with broad-based black economic empowerment (BBBEE) targets.

The transaction will enhance PPC’s BBBEE status and is expected to improve the company’s rating to level 1 and was closed on August 4.

“PPC has been built upon the shoulders of its employees and this transaction provides a meaningful way of rewarding those in South Africa who do not participate in PPC’s long-term incentive plan to share in the creation of shareholder value. We are pleased that the terms of the transaction are such that it stands to benefit employees for many years to come,” said PPC CEO Roland van Wijnen.

Further, the purchase price of R380-million will be funded through a PPC loan of R380-million and an additional R975 000 to cover related securities transfer tax.

The loan will be repaid through future dividends declared by PPC South Africa to the trust, and 25% to be distributed to all qualifying beneficiaries of the trust, while 75% will be distributed to PPC, less any tax to be withheld, towards repayment of the loan.

For the foreseeable future, until the loan including capitalised interest has been fully repaid, qualifying employees will effectively receive 2.5% of any dividends declared by PPC South Africa.

Following the repayment of the loan in full, qualifying employees will receive 10% of the dividends declared by PPC South Africa.

The gross debt of the consolidated South African operations will not be affected by the transaction, PPC noted.