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Jan
01
2008
 
First BBBEE Transaction
 

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Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Registration number 1892/000667/06)
JSE share code: PPC
JSE ISIN: ZAE000096475
ZSE share code: PPC
ZSE ISIN: ZWE000096475
("PPC" or "the company")
PPC’S 15% BROAD-BASED BLACK SHARE OWNERSHIP INITIATIVE
HIGHLIGHTS
- R2.7 billion broad-based black ownership initiative
- The broad-based black ownership initiative will result in
the acquisition of a 15.00% shareholding by black people in
the increased issued share capital of PPC
- Major portion (7.95% of the 15.00%) allocated to broadbased
empowerment groupings through the inclusion of PPC
employees and their immediate families, communities,
construction and related industry associations, education
and community service groups
- The broad-based black ownership initiative will directly
benefit approximately three and a half million people in
South Africa, of which 99.90% are black individuals
- Total risk equity capital of approximately R65.4 million
contributed by black economic empowerment parties
- Implemented by way of an issue of shares for cash for 8.50%
of PPC’s increased share capital and a scheme of
arrangement in terms of section 311 of the Companies Act,
1973 (Act 61 of 1973) for 6.65% of PPC’s increased share
capital
- Simultaneously with the implementation of the broad-based
black ownership initiative, PPC will raise approximately
R1.5 billion of long-term debt to replace existing shortterm
interest-bearing debt raised by the company to fund
its capital expansion projects and working capital
requirements
1. INTRODUCTION
PPC is pleased to announce that, subject to the fulfilment of
conditions precedent summarised in paragraph 9 below, it has
concluded agreements for the subscription and issue of new PPC
ordinary shares of R0.10 each (“PPC shares”) (“the Share Issue”),
and has established trusts to acquire PPC shares from existing
PPC shareholders, either directly (“the Direct Trusts”) or
indirectly through special purpose vehicle private companies
(“Funding SPVs”) (“the Indirect Trusts”), under a scheme of
arrangement in terms of section 311 of the Companies Act, 1973
(Act 61 of 1973) proposed by the Direct Trusts and the Funding
SPVs (“the Scheme”).
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The Share Issue and the Scheme will collectively result in a
15.00% interest in the issued share capital of PPC, immediately
following implementation of the Share Issue and the Scheme, less
treasury shares, (“PPC’s increased share capital”) being held by
a broad-based grouping of black entities and 0.15% being held by
white employees (together, "the broad-based black ownership
initiative").
The broad-based black ownership initiative participants comprise
the following:
- pursuant to the Scheme:
- a trust for the empowerment of construction and related
industry associations and their members (“The PPC
Construction Industry Associations Trust”), which will
indirectly acquire 2.00% of PPC’s increased share capital;
- a trust for the empowerment of current and future black
managers of PPC’s South African operations ("The PPC Black
Managers Trust"), which will acquire 1.83% of PPC’s
increased share capital;
- a trust for the education and development of stakeholders
in cement, lime and aggregates manufacturing, mining,
construction and related industries (“The PPC Education
Trust”), which will indirectly acquire 1.00% of PPC’s
increased share capital;
- a trust for the empowerment and upliftment of the
communities in the regions where PPC operates and/or from
which it sources its employees in South Africa (“The PPC
Community Trust”), which will indirectly acquire 0.70% of
PPC’s increased share capital;
- two trusts for the empowerment of current and future black
and white employees of PPC, employed by the South African
operations of PPC ("The Current PPC Team Trust" and “The
Future PPC Team Trust”), which will collectively acquire
0.57% of PPC’s increased share capital (0.42% to be
acquired for black employees);
- a trust for the education, development, healthcare,
wellness and other compassionate needs of the primarily
black employees of PPC’s South African operations and their
immediate families (“The PPC Team Benefit Trust”), which
will indirectly acquire 0.50% of PPC’s increased share
capital;
- a trust for the benefit of current black independent nonexecutive
directors of PPC (“The PPC Black Independent Nonexecutive
Directors Trust”), which will acquire 0.05% of
PPC’s increased share capital;
- pursuant to the Share Issue:
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- community service groups (“CSGs”), being Shalamuka Cement
Investment Company (Proprietary) Limited (“Shalamuka”), the
entire issued share capital of which is held by The
Shalamuka Foundation, and DEC Investment Holding Company
(Proprietary) Limited (“DEC”), which will, between them, be
allotted and issued 1.50% of PPC’s increased share capital;
and
- strategic black partners (“SBPs”), being Peu Group
(Proprietary) Limited or an assignee of that company with
materially the same shareholders (“Peu”), Nozala
Investments (Proprietary) Limited (“Nozala”), iLima
Portland Consortium (Proprietary) Limited (“iLima”) and
Capital Edge Cement Consortium (Proprietary) Limited
(“Capital Edge”), which will, as a consortium, be allotted
and issued 7.00% of PPC’s increased share capital.
2. RATIONALE FOR THE BROAD-BASED BLACK OWNERSHIP INITIATIVE
PPC forms an integral part of the infrastructure development
currently taking place in southern Africa. Accordingly, the board
of directors of PPC (“the PPC board”) recognises the important
contribution PPC can make to the transformation and empowerment
of South Africa to ensure the country’s success on both an
economic and social front. As a result, PPC has structured the
broad-based black ownership initiative to ensure that the broadbased
component forms the major portion.
The PPC board is of the view that the broad-based black ownership
initiative is both sustainable and embraces the principles of
Broad-Based Black Economic Empowerment (“BBBEE”). The broad-based
black ownership initiative allocates 7.95% of PPC’s increased
share capital to broad-based entities, 7.00% to four SBPs and
0.05% to black independent non-executive directors of PPC, all of
whom are expected to make a meaningful contribution to PPC and
its business in the future.
The PPC board acknowledges the responsibility it has to its
shareholders and, accordingly, has structured the broad-based
black ownership initiative to minimise shareholder cost and
dilution, whilst still allowing the CSGs and SBPs to leverage off
the strength of the company’s balance sheet, lowering the cost of
funding for the CSGs and SBPs and enhancing the sustainability of
the broad-based black ownership initiative. At an appropriate
time in the future, PPC will consider buying back shares to
reduce the dilutionary effect of the broad-based black ownership
initiative.
The following key tenets of PPC’s transformation philosophy and
strategy formed the basic principles upon which the broad-based
black ownership initiative has been structured:
- to create an ownership opportunity for black employees;
- to create business opportunities for black partners;
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- to develop future black leaders for the business;
- to invest in and develop black construction businesses; and
- to invest in, educate and develop members of disadvantaged
communities and employees and their immediate families.
PPC views the involvement of its employees and their immediate
families, the communities in which it operates, the support for
construction and related industry associations and the education
of historically disadvantaged individuals as crucial to the
success of its empowerment objectives. The PPC board believes
that the broad-based black ownership initiative presents the
company with a unique opportunity to make significant strides in
achieving its BBBEE objectives.
PPC’s broad-based black ownership initiative has been developed
in accordance with the Broad-Based Socio-Economic Empowerment
Charter for the South African Mining Industry and attached
Scorecard developed by the Minister of Minerals and Energy in
terms of the Mineral and Petroleum Resources Development Act,
2002 (Act 28 of 2002) and published in Government Notice R1639 on
13 August 2004 (“the Mining Charter”), the Codes of Good Practice
on Broad-Based Black Economic Empowerment, as gazetted in
Government Gazette No. 29617 on 9 February 2007 (“the Codes”) and
the Broad-Based Black Economic Empowerment Act, 2003 (Act 53 of
2003) (“the BBBEE Act”). The Mining Charter requires that at
least 15.00% of PPC’s share capital be held by black people by
the time applications for conversion of mining licences are
submitted, being May 2009 at the latest, in order for PPC to be
able to convert its existing old order mining rights to new order
mining rights. The broad-based black ownership initiative enables
PPC to meet this requirement.
As indicated above, PPC is committed to transformation and
empowerment in South Africa and will further strengthen its
empowerment credentials, at the appropriate time, in line with
applicable legislation, including the Mining Charter and the
Codes.
3. THE RESULTANT STRUCTURE
A diagram illustrating the shareholding structure of PPC
subsequent to the implementation of the broad-based black
ownership initiative will be published in the press on
Friday, 29 August 2008 and will be available on PPC’s website.
4. MECHANICS OF THE BROAD-BASED BLACK OWNERSHIP INITIATIVE
The broad-based black ownership initiative will be implemented by
means of the Scheme in respect of 6.65% of PPC’s increased share
capital and the Share Issue in respect of 8.50% of PPC’s
increased share capital.
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4.1 The Scheme
In pursuing their objects, the Direct Trusts and the Indirect
Trusts will acquire PPC shares for the purpose of the broad-based
black ownership initiative. The trustees of the Direct Trusts and
the Funding SPVs will together propose the Scheme between PPC and
its shareholders (“Scheme Participants”) for the acquisition by
the Direct Trusts and Funding SPVs of approximately 38.0 million
PPC shares (“Scheme Shares”), on a pro rata basis from PPC
shareholders, for a consideration of approximately R31.32 per
share (“Scheme Consideration”), being the 30 business day volume
weighted average share price per PPC share on the exchange
operated by the JSE Limited (“JSE”) up to the close of trading on
Thursday, 21 August 2008 (“VWAP”).
Each PPC shareholder will, subject to the requisite shareholder
approval and court sanction, be required to dispose of
approximately 7.27 shares to the trusts referred to above for
every 100 shares held as at the close of business on Friday, 12
December 2008 (“Record Date”). The aggregate value of the Scheme
will be approximately R1.2 billion.
The Direct Trusts and the Indirect Trusts can be further
separated into internal trusts, of which the beneficiaries are
primarily the employees of PPC and their immediate families, and
external trusts, of which the beneficiaries are primarily persons
and/or organisations external to PPC.
Internal trusts:
- The PPC Black Managers Trust;
- The Current PPC Team Trust;
- The Future PPC Team Trust;
- The PPC Team Benefit Trust; and
- The PPC Black Independent Non-executive Directors Trust.
External trusts:
- The PPC Construction Industry Associations Trust;
- The PPC Education Trust; and
- The PPC Community Trust.
4.1.1 The Indirect Trusts
The trusts detailed in this paragraph 4.1.1 will hold PPC shares
indirectly through Funding SPVs. All funding in respect of the
Indirect Trusts is being underwritten by The Standard Bank of
South Africa Limited.
4.1.1.1 The PPC Construction Industry Associations Trust
A Funding SPV has been established, the issued shares of which
are 100% held by The PPC Construction Industry Associations Trust
(“The PPC Construction Industry Associations Trust Funding SPV”).
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The PPC Construction Industry Associations Trust Funding SPV will
acquire 11 425 407 Scheme Shares at the Scheme Consideration at
an aggregate acquisition amount of approximately R357.8 million.
The aggregate acquisition amount plus certain transaction costs
will be funded by preference share and debt funding provided by
third party institutions. The funding will comprise of
approximately R120.6 million of preference shares redeemable with
an eight-year term, approximately R120.6 million of preference
shares redeemable with a five-year term, both carrying cumulative
cash dividends at market-related rates, and a five-year term loan
of approximately R120.6 million at a market-related rate. PPC
will provide guarantees to the funding institutions with respect
to the five-year redeemable preference shares and the five-year
term loan.
The PPC Construction Industry Associations Trust is an external
trust as the beneficiaries of The PPC Construction Industry
Associations Trust will be a number of existing, new and emerging
construction industry associations, selected by the trustees of
the trust, which satisfy the criteria set out in the trust deed.
The net income of The PPC Construction Industry Associations
Trust will be allocated to the construction industry associations
in respect of specific projects which benefit previously
disadvantaged individuals and their communities, and is expected
to result in a significant amount of enterprise development
within the beneficiary communities. The dividends on the PPC
shares held by The PPC Construction Industry Association Trust
Funding SPV will be used to service its obligations to the
funders, while an annual ordinary trickle dividend will be paid
to The PPC Construction Industry Associations Trust for payments
of the net amount to beneficiaries in pursuance of its objects.
At least 85% of the benefits of the trust will be allocated to
black persons as defined in the Codes.
The trustees will, in consultation with the interested parties,
identify appropriate projects which meet the objects of the
trust. The projects are expected to be predominantly training
programmes and infrastructure and related projects. After
appropriate projects have been identified, the trustees will
consider the identified projects and will recommend what
benefits, if any, will be allocated to the identified projects.
The trustees will thereafter submit the list of projects and
benefit allocations to a sub-committee of the PPC board (“the
allocation committee”) for ratification, subject to the projects
being in compliance with the criteria set out in the trust deed.
The PPC Construction Industry Associations Trust is intended as a
long-term trust and the Scheme Shares will not vest in the
beneficiaries.
From early in 2009, there will at all times be five trustees of
The PPC Construction Industry Associations Trust and the
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composition of the trustees will comply with the Codes. The
majority of the trustees will not be appointed by PPC.
4.1.1.2 The PPC Education Trust
A Funding SPV has been established, the issued shares of which
are 100% held by The PPC Education Trust (“The PPC Education
Trust Funding SPV”).
The PPC Education Trust Funding SPV will acquire 5 712 704 Scheme
Shares at the Scheme Consideration at an aggregate acquisition
amount of approximately R178.9 million. The aggregate acquisition
amount plus certain transaction costs will be funded by
preference share and debt funding provided by third party
institutions. The funding will comprise of approximately
R60.3 million of preference shares redeemable with an eight-year
term, approximately R60.3 million of preference shares redeemable
with a five-year term, both carrying cumulative cash dividends at
market-related rates, and a five-year term loan of approximately
R60.3 million at a market-related rate. PPC will provide
guarantees to the funding institutions with respect to the fiveyear
redeemable preference shares and the five-year term loan.
The PPC Education Trust is an external trust as it has been
established for the purpose of skills development, learnerships
and basic adult education in the cement, lime and aggregates
manufacturing, mining, construction and related industries, which
satisfy the criteria set out in the trust deed. The dividends on
the PPC shares held by The PPC Education Trust Funding SPV will
be used to service its obligations to the funders, while an
annual ordinary trickle dividend will be paid to The PPC
Education Trust for payments of the net amount to beneficiaries
in pursuance of its objects. At least 85% of the benefits of the
trust will be allocated to black persons as defined in the Codes.
The PPC Education Trust will either operate as an educational
organisation itself (contracting with service providers) and the
trustees will select beneficiaries to benefit from the activities
of the trust, and/or the trustees will select education
organisations and individuals which satisfy the criteria set out
in the trust deed to benefit from the trust. The trustees will
submit a list of beneficiaries and benefit allocations to the
allocation committee for ratification, subject to the benefits
being in compliance with the criteria set out in the trust deed.
The PPC Education Trust is intended as a long-term trust and the
Scheme Shares will not vest in the beneficiaries.
From early in 2009, there will at all times be five trustees of
The PPC Education Trust and the composition of the trustees will
comply with the Codes. The majority of the trustees will not be
appointed by PPC.
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4.1.1.3 The PPC Community Trust
A Funding SPV has been established, the issued shares of which
are 100% held by The PPC Community Trust (“The PPC Community
Trust Funding SPV”).
The PPC Community Trust Funding SPV will acquire 4 015 621 Scheme
Shares at the Scheme Consideration at an aggregate acquisition
amount of approximately R125.8 million. The aggregate acquisition
amount plus certain transaction costs will be funded by
preference share and debt funding provided by third party
institutions. The funding will comprise of approximately
R42.4 million of preference shares redeemable with an eight-year
term, approximately R42.4 million of preference shares redeemable
with a five-year term, both carrying cumulative cash dividends at
market-related rates, and a five-year term loan of approximately
R42.4 million at a market-related rate. PPC will provide
guarantees to the funding institutions with respect to the fiveyear
redeemable preference shares and the five-year term loan.
The PPC Community Trust is an external trust as the beneficiaries
of The PPC Community Trust will be the communities in the regions
where PPC operates and/or from which PPC sources its employees.
The dividends on the PPC shares held by The PPC Community Trust
Funding SPV will be used to service its obligations to the
funders, while an annual ordinary trickle dividend will be paid
to The PPC Community Trust for payments of the net amount to
beneficiaries in pursuance of its objects. At least 85% of the
benefits of the trust will be allocated to black persons as
defined in the Codes.
PPC will establish a community engagement forum in each community
identified to benefit from the trust, in order to represent that
community and oversee the implementation of local projects within
the community. In addition, the community engagement forum will
be required to consult with the community regarding projects to
be funded by the trust and make recommendations to the trustees
regarding the funding of these projects. The trustees will
thereafter submit the list of projects and benefit allocations to
the allocation committee for ratification, subject to the
projects being in compliance with the criteria set out in the
trust deed.
The PPC Community Trust is intended as a long-term trust and the
Scheme Shares will not vest in the beneficiaries.
From early in 2009, there will at all times be five trustees of
The PPC Community Trust and the composition of the trustees will
comply with the Codes. The majority of the trustees will not be
appointed by PPC.
4.1.1.4 The PPC Team Benefit Trust
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A Funding SPV has been established, the issued shares of which
are 100% held by The PPC Team Benefit Trust (“The PPC Team
Benefit Trust Funding SPV”).
The PPC Team Benefit Trust Funding SPV will acquire 2 856 352
Scheme Shares at the Scheme Consideration at an aggregate
acquisition amount of approximately R89.5 million. The aggregate
acquisition amount plus certain transaction costs will be funded
by preference share and debt funding provided by third party
institutions. The funding will comprise of approximately
R30.2 million of preference shares redeemable with an eight-year
term, approximately R30.2 million of preference shares redeemable
with a five-year term, both carrying cumulative cash dividends at
market-related rates, and a five-year term loan of approximately
R30.2 million at a market-related rate. PPC will provide
guarantees to the funding institutions with respect to the fiveyear
redeemable preference shares and the five-year term loan.
The PPC Team Benefit Trust is an internal trust as the
beneficiaries of The PPC Team Benefit Trust will be primarily
black South African employees of PPC, employed by the South
African operations of PPC, and their immediate families, which
have qualifying needs (primarily education and development as
well as healthcare and wellness requirements). The dividends on
the PPC shares held by The PPC Team Benefit Trust Funding SPV
will be used to service its obligations to the funders, while an
annual ordinary trickle dividend will be paid to The PPC Team
Benefit Trust for payments of the net amount to beneficiaries in
pursuance of its objects. At least 85% of the benefits of the
trust will be allocated to black persons as defined in the Codes.
The allocation committee or a committee that is delegated powers
in respect of allocations by the PPC board will be responsible
for determining qualifying needs, while the trustees and the
allocation committee will determine the identity of the employees
chosen to benefit and the allocation of funds distributed by The
PPC Team Benefit Trust to the beneficiaries.
The PPC Team Benefit Trust is intended as a long-term trust and
the Scheme Shares will not vest in the beneficiaries.
From early in 2009, there will at all times be three trustees of
The PPC Team Benefit Trust and the composition of the trustees
will comply with the Codes. The majority of the trustees will not
be appointed by PPC.
4.1.2 The Direct Trusts
The trusts detailed in this paragraph 4.1.2 will hold PPC shares
directly.
4.1.2.1 The PPC Black Managers Trust
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The PPC Black Managers Trust will acquire 10 470 419 Scheme
Shares at the Scheme Consideration at an aggregate acquisition
amount of approximately R327.9 million. The aggregate acquisition
amount plus certain transaction costs will be funded by a capital
contribution of approximately R165.8 million to The PPC Black
Managers Trust by a subsidiary of PPC, as well as a five-year
term loan of approximately R165.8 million from funding
institutions at a market-related rate.
The beneficiaries of The PPC Black Managers Trust will acquire
vested rights in terms of the trust deed. The trustees of The PPC
Black Managers Trust will be required to sell a sufficient number
of PPC shares vested in the beneficiaries at 31 December 2016 to
repay the outstanding funding. The balance of the shares will be
distributed to the beneficiaries in accordance with their vested
rights.
The PPC Black Managers Trust is an internal trust as the
beneficiaries of The PPC Black Managers Trust will include all
black managers employed by PPC’s South African operations as at 1
December 2008, who will receive benefits based on their annual
cost to company as at 31 July 2008, as well as black managers
joining the employ of PPC’s South African operations post
31 July 2008. An allocation committee will be responsible for
determining qualifying black managers and for the allocation of
PPC shares to such qualifying black managers by the trustees.
The beneficiaries will be required to remain in the employ of PPC
for four years to avoid forfeiture of all the PPC shares that
vest in them, five years to avoid forfeiture of two thirds of the
PPC shares that vest in them and six years to avoid forfeiture of
one third of the PPC shares that vest in them. PPC shares will
only be delivered to beneficiaries and become tradable after an
eight year period ending on 31 December 2016.
From early in 2009, there will at all times be five trustees of
The PPC Black Managers Trust and the composition of the trustees
will comply with the Codes. The majority of the trustees will be
elected by the beneficiaries of the trust.
4.1.2.2 The Current PPC Team Trust and The Future PPC Team Trust
The employer companies within PPC, and PPC itself, will make
contributions to The Current PPC Team Trust and The Future PPC
Team Trust, in order to retain and incentivise the beneficiaries,
which will be used by the trusts to collectively acquire
3 224 658 Scheme Shares.
The beneficiaries of The Current PPC Team Trust and The Future
PPC Team Trust will hold and exercise both economic and voting
rights in respect of the PPC shares. The Current PPC Team Trust
and The Future PPC Team Trust are both internal trusts as the
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beneficiaries of these trusts will include all current black and
white employees of PPC employed by the South African operations
of PPC as at 1 December 2008, who will receive benefits based on
their completed years of service within PPC as at 31 July 2008,
as well as black and white employees joining the employ of PPC
post 31 July 2008. As at 31 July 2008, there were 2 193 employees
eligible for participation in The Current PPC Team Trust and The
Future PPC Team Trust.
PPC shares acquired by each beneficiary will vest upon allocation
and the beneficiaries will be entitled to receive dividends and
any distributions paid by PPC in respect of these shares from the
date of allocation. Termination of employment will not affect
beneficiaries’ rights in respect of the shares acquired by them.
Notwithstanding the immediate vesting of the PPC shares, the PPC
shares will only become tradable after a period of five years
from the allocation date. The allocation per beneficiary in The
Current PPC Team Trust and The Future PPC Team Trust will be
subject to a maximum market value of shares to be allocated of
R50 000.00.
It is intended that The Current PPC Team Trust and The Future PPC
Team Trust will collectively constitute a broad-based employee
share plan as contemplated by section 8B of the Income Tax Act,
No. 58 of 1962, as amended, subject to the promulgation of
proposed amendments to that legislation, on the basis that the
trust deeds will contain appropriate wording.
There will be two PPC appointed trustees of The Current PPC Team
Trust. The Future PPC Team Trust will have five trustees, the
majority of whom will be elected by the beneficiaries.
The trustees of The Current PPC Team Trust and The Future PPC
Team Trust will vote unallocated shares in the best interests of
the beneficiaries and will vote allocated shares on the
instruction of the beneficiaries.
4.1.2.3 The PPC Black Independent Non-executive Directors Trust
Subject to the approval of the beneficiaries by shareholders of
PPC in general meeting, PPC will make a contribution to The PPC
Black Independent Non-executive Directors Trust, which will be
used by it to acquire 287 361 Scheme Shares at the Scheme
Consideration at an aggregate acquisition amount of approximately
R9.0 million and to settle certain transaction costs.
The beneficiaries of The PPC Black Independent Non-executive
Directors Trust will be entitled to exercise both economic and
voting rights in respect of the PPC shares acquired by the trust
on their behalf. The PPC Black Independent Non-executive
Directors Trust is an internal trust as it is intended that,
subject to shareholder approval, the beneficiaries of this trust
will be the three black independent non-executive directors on
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the PPC board at the date of this announcement, being Joe
Shibambo, Zibusiso Kganyago and Ntombi Langa-Royds.
The beneficiaries will be required to remain on the board of PPC
for four years to avoid forfeiture of all the PPC shares that
vest in them, five years to avoid forfeiture of two thirds of the
PPC shares that vest in them and six years to avoid forfeiture of
one third of the PPC shares that vest in them. PPC shares will
only be delivered to beneficiaries and become tradable after a
six year period ending on 31 December 2014.
4.2 The Share Issue
The funding in respect of the CSG and the SBP components of the
broad-based black ownership initiative, amounting to
approximately R1.5 billion, is underwritten by The Standard Bank
of South Africa Limited.
4.2.1 The Community Service Groups (CSGs)
A funding SPV (“the CSG Funding SPV”) has been established for
the CSGs to subscribe for PPC shares representing 1.50% of PPC’s
increased share capital and to advance a loan to PPC as referred
to below. The CSGs will, between them, hold all of the shares in
the CSG Funding SPV and will, between them, procure an equity
contribution of approximately R5.4 million into the CSG Funding
SPV. The CSG Funding SPV will be allotted and issued 1.50% of
PPC’s increased share capital.
The CSG Funding SPV will initially subscribe for PPC shares (“the
CSG initial subscription shares”) at the par value of those
shares at an aggregate subscription price of approximately
R0.9 million. The CSG initial subscription shares will have full
voting and economic rights.
PPC will, in certain circumstances, but in any event after an
eight year period (“CSG ordinary course period”), subject to the
rights of the funders contemplated below, repurchase all of the
CSG initial subscription shares from the CSG Funding SPV at a
price equal to their current par value.
The CSG Funding SPV will in certain circumstances, but in any
event after the expiry of the CSG ordinary course period (“the
CSG subscription date”), be obliged to subscribe for a stipulated
number of PPC shares (“the CSG maturity subscription shares”) at
a predetermined subscription price of R66.84 per PPC share.
The CSG equity contribution of approximately R5.4 million will be
used in part to settle the subscription price of the CSG initial
subscription shares, as well as certain transaction costs, whilst
the balance will be used to advance a loan to PPC as described
below.
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The CSG Funding SPV has entered into loan agreements for the
raising of an aggregate of approximately R264.8 million,
comprised of an eight year senior amortising loan of
approximately R162.0 million and an eight year senior
subordinated loan of approximately R102.8 million. The CSG
Funding SPV will in turn use the proceeds of these loans and the
equity contribution (net of costs) to advance an eight year fixed
interest rate bullet loan of approximately R268.4 million to PPC
(“the CSG PPC Loan”).
At the end of the CSG ordinary course period referred to above,
the senior amortising loan will have been amortised, and,
following the repayment of the CSG PPC Loan, the CSG Funding SPV
should be able to repay its loan obligations.
Any balance from the repayment of the CSG PPC Loan following
settlement by the CSG Funding SPV of its funding obligations will
be used to subscribe for the CSG maturity subscription shares in
PPC (as mentioned above) on the CSG subscription date. The CSG
Funding SPV will be required to raise its own funding to finance
the balance needed for that subscription. If it is not able to
raise the finance to subscribe for the CSG maturity subscription
shares on the CSG subscription date, the CSG Funding SPV will,
subject to certain conditions, be permitted to subscribe for the
PPC shares over an extended period ending on 30 June 2018.
Various restrictions are imposed on each CSG and the CSG Funding
SPV to maintain the BBBEE status for the term of the broad-based
black ownership initiative, as follows:
Prior to 31 December 2014, save with the prior written consent of
PPC and subject to restrictions imposed by the funding
arrangements, neither CSG will be able to sell the shares it
holds in the CSG Funding SPV and the CSG Funding SPV will be
unable to sell the shares it holds in PPC. Between 1 January 2015
and 31 December 2017, each CSG and the CSG Funding SPV will,
subject to restrictions imposed by the funding arrangements and a
first pre-emptive right in PPC’s favour and a second pre-emptive
right in favour of the other CSG, be entitled to sell the shares
held in the CSG Funding SPV and PPC, respectively, provided that,
if PPC and the other CSG do not exercise their pre-emptive
rights, the shares are sold to a third party that makes at least
an equivalent contribution to the empowerment credentials of PPC.
Neither CSG will be able to encumber the shares it holds in the
CSG Funding SPV and the CSG Funding SPV will be unable to
encumber the shares it holds in PPC until 31 December 2017, save
for any encumbrances permitted by the funding arrangements.
The CSGs will be required, through the CSG Funding SPV, to make a
minimum contribution to the empowerment credentials of PPC until
31 December 2017.
14
4.2.2 The Strategic Black Partners (SBPs)
A funding SPV (“the SBP Funding SPV”) has been established for
the SBPs to subscribe for PPC shares representing 7.00% of PPC’s
increased share capital and to advance a loan to PPC as referred
to below. The SBPs will, as a consortium, hold all the shares in
the SBP Funding SPV and procure an equity contribution of
R60.0 million into the SBP Funding SPV. The SBP Funding SPV will
be allotted and issued 7.00% of PPC’s increased share capital.
The SBP Funding SPV will initially subscribe for PPC shares (“the
SBP initial subscription shares”) at the par value of those
shares at an aggregate subscription price of approximately
R4.0 million. The SBP initial subscription shares will have full
voting and economic rights.
PPC will, in certain circumstances, but in any event after an
eight year period (“SBP ordinary course period”), subject to the
rights of the funders contemplated below, repurchase all of the
SBP initial subscription shares from the SBP Funding SPV at a
price equal to their current par value.
The SBP Funding SPV will in certain circumstances, but in any
event after the expiry of the SBP ordinary course period (“the
SBP subscription date”), be obliged to subscribe for a stipulated
number of PPC shares (“the SBP maturity subscription shares”) at
a predetermined subscription price of R66.84 per PPC share.
The SBP equity contribution of R60.0 million will be used in part
to settle the subscription price of the SBP initial subscription
shares, as well as certain transaction costs, whilst the balance
will be used to advance a loan to PPC as described below.
The SBP Funding SPV has entered into loan agreements for the
raising of an aggregate of approximately R1.2 billion, comprised
of an eight year senior amortising loan of approximately
R755.7 million and an eight year senior subordinated loan of
approximately R445.0 million. The SBP Funding SPV will in turn
use the proceeds of these loans and the equity contribution (net
of costs) to advance an eight year fixed interest rate bullet
loan of approximately R1.3 billion to PPC (“the SBP PPC Loan”).
At the end of the SBP ordinary course period referred to above,
the senior amortising loan will have been amortised, and,
following the repayment of the SBP PPC Loan, the SBP Funding SPV
should be able to repay its loan obligations.
Any balance from the repayment of the SBP PPC Loan following
settlement by the SBP Funding SPV of its funding obligations will
be used to subscribe for the SBP maturity date subscription
shares in PPC (as mentioned above) on the SBP subscription date.
The SBP Funding SPV will be required to raise its own funding to
finance the balance needed for that subscription. If it is not
15
able to raise the finance to subscribe for the SBP maturity
subscription shares on the SBP subscription date, the SBP Funding
SPV will, subject to certain conditions, be permitted to
subscribe for the PPC shares over an extended period ending on
30 June 2018.
Various restrictions are imposed on each SBP and the SBP Funding
SPV to maintain the BBBEE status for the term of the broad-based
black ownership initiative, as follows:
Prior to 31 December 2014, save with the prior written consent of
PPC and save for any encumbrances permitted by the funding
arrangements, the SBPs will be unable to encumber or sell the
shares they hold in the SBP Funding SPV and the SBP Funding SPV
will be unable to encumber or sell the shares it holds in PPC.
Between 1 January 2015 and 31 December 2017, save with the prior
written consent of PPC or the relevant funders, the SBPs and the
SBP Funding SPV will not be entitled to encumber their shares in
the SBP Funding SPV and PPC, respectively, but will, subject to
restrictions imposed by the funding arrangements and a first preemptive
right in PPC’s favour and a second pre-emptive right in
favour of the other SBPs, be entitled to sell the shares held in
the SBP Funding SPV and PPC, respectively, provided that, if PPC
and the other SBPs do not exercise their pre-emptive rights, the
shares are sold to a third party that makes at least an
equivalent contribution to the empowerment credentials of PPC.
The SBPs will be required, through the SBP Funding SPV, to make a
minimum contribution to the empowerment credentials of PPC until
31 December 2017.
5. OVERVIEW OF THE COMMUNITY SERVICE GROUPS
5.1 Shalamuka Cement Investment Company (Proprietary) Limited
Shalamuka is a trust formed in 2006 to raise long-term,
sustainable funding for the highly regarded Penreach Whole School
Development Programme (“Penreach”). Penreach is a programme which
develops teaching skills by way of workshops attended by over
2 200 teachers from approximately 900 public schools. 100% of the
beneficiaries of Penreach are black, rural South Africans, of
which at least 90% are black rural women. It is estimated that
over 350 000 learners from rural areas benefit from Penreach
annually.
5.2 DEC Investment Holding Company (Proprietary) Limited
DEC is wholly owned by the Disability Empowerment Concerns Trust
(“the DEC Trust”). The DEC Trust was established in 1996 by seven
non-governmental organisations representing people with
disabilities to engage in business ventures in the context of
BBBEE.
16
The ultimate beneficiaries are South Africans with disabilities
served by:
- The Deaf Federation of South Africa;
- Disabled People South Africa;
- National Council for Persons with Physical Disabilities in
South Africa;
- South African Federation for Mental Health;
- South African National Council for the Blind;
- Epilepsy South Africa; and
- The Thabo Mbeki Development Trust for Disabled People.
6. OVERVIEW OF THE STRATEGIC BLACK PARTNERS
6.1 Peu Group (Proprietary) Limited
Peu is a black owned and black managed company, incorporated in
1996. Peu is an entrepreneurial business, with management holding
72.00% of the share capital, with the remaining 28.00% being held
by the Intsika Trusts for the benefit of black individuals
through the promotion of entrepreneurship and education.
Peu’s investment philosophy is to target investments in which it
can add value and be a long-term investor, thereby fostering
long-term relationships with management and shareholders.
The executive management team comprises seven individuals, with a
combination of skills, including business experience across a
number of sectors, investment banking and finance.
Peter Malungani is the founder and Executive Chairman of Peu.
Peu holds strategic long-term investments in the infrastructure,
financial services, IT, agriculture, gaming, supply chain and
automotive sectors. Over the last four years Peu has been
investing predominantly in the infrastructure sector and has
acquired majority shareholdings in civil contracting and building
construction businesses.
6.2 Nozala Investments (Proprietary) Limited
Nozala is a broad-based investment company established in 1996
and is controlled, led and managed by women. Nozala has an
established track record with significant net asset value and
proactively participates in its investments.
Nozala’s philosophy is to support its equity investments with
operational involvement through value-adding activities.
Nozala is led by Salukazi Dakile-Hlongwane, the Acting
Chairperson and Chief Executive.
Nozala has the following shareholders:
- Nozala Holdings (Proprietary) Limited (54.00%);
- Nozala Trust (20.00%);
17
- The National Movement of Rural Women (4.00%);
- Itumeleng Investments CC (4.00%);
- Sediba Women’s Trust (4.00%);
- Workers Investments Corporation (Proprietary) Limited (2.00%);
- Akhona Holdings (Proprietary) Limited (2.00%);
- Mmathari Investments CC (2.00%);
- Katekani Investments (Proprietary) Limited (2.00%);
- Musa Trust (2.00%);
- Sequoia Investments CC (2.00%); and
- Umvutho Oil and Energy (Proprietary) Limited (2.00%).
Nozala has to date advanced and distributed approximately
R15.0 million to the Nozala Trust to support its social
investment programmes. The Nozala Trust supports women business
start-ups and develops women entrepreneurs principally in the
peri-urban and rural areas.
6.3 iLima Portland Consortium (Proprietary) Limited
iLima is a black owned company the shares of which are held
largely by the major shareholders of the iLima Group
(Proprietary) Limited (“iLima Group”). iLima was established for
the purposes of participating in the PPC broad-based black
ownership initiative.
iLima is led by Dr Mandla Gantsho, Dr TJ Lupepe and Simisani
Kupe.
iLima has the following shareholders:
- Gantsho Family Trust (32.50%);
- Lupepe Family Trust (32.50%);
- Kupe Family Trust (8.49%);
- iLima Group Employee Trust (6.50%);
- Code Access Investments (Proprietary) Limited (5.00%);
- Tamela Holdings (Proprietary) Limited (5.00%);
- Ndungane Family Trust (2.00%); and
- five black individuals (8.01%).
iLima Group is a long term investor focused on infrastructure,
construction, mineral exploration, energy generation,
transmission, distribution and property development. It also has
a successful track record with investments in Group Five Limited,
Bombela Concession Company (Proprietary) Limited on the Gautrain
Rail concession and Imbumba Aganang Concession Company
(Proprietary) Limited on the Department of Foreign Affairs
Headquarters concession.
6.4 Capital Edge Cement Consortium (Proprietary) Limited
Capital Edge is a collaboration of black individuals and broadbased
groups and was incorporated in August 2006 primarily for
the purpose of the strategic black partnership with PPC. One of
Capital Edge’s principles is to be a strategic partner of choice
through broad-based empowerment for companies that have the
18
potential to create employment, human capital development and
shareholder returns.
Capital Edge is led by businessman Jerry Vilakazi, CEO of
Business Unity South Africa and Chairman of Netcare Limited.
Capital Edge has the following ordinary shareholders:
- Capital Edge Resources (Proprietary) Limited (66.71%);
- Black Management Forum Investments Company Limited (17.81%);
- Imbewu Mineral Holdings (Proprietary) Limited (7.08%);
- Baswa Investments (Proprietary) Limited (3.88%);
- Abafazi iAfrika Group (Proprietary) Limited (2.58%); and
- Yard Capital (Proprietary) Limited (1.94%).
In addition, Ubuntu-Botho Investment Holdings (Proprietary)
Limited holds participating preference shares entitling it to an
economic interest of 22.59%.
The shareholders of Capital Edge are committed long-term
investors who want to work with PPC to grow the company in its
markets locally and in southern Africa. All of the shareholders
of Capital Edge have extensive business and management experience
which they bring as value-add to the broad-based black ownership
initiative and will assist PPC in its growth and transformation
initiatives.
7. USE OF FUNDS RECEIVED
PPC raised short-term interest-bearing debt to fund its
established growth strategy, expansion and modernisation capital
expenditure programme and working capital requirements. The
company will receive approximately R1.5 billion of long-term debt
through the CSG PPC Loan and the SBP PPC Loan, which the company
intends using to replace the short-term debt.
8. IFRS2 CHARGE
PPC’s facilitation of the broad-based black ownership initiative
is expected to have an impact of approximately R557.4 million,
calculated in accordance with IFRS2. This equates to 3.24% of
PPC’s market capitalisation of R17.2 billion based on the share
price of PPC as at the close of business on
Thursday, 21 August 2008.
9. CONDITIONS PRECEDENT
The broad-based black ownership initiative is subject to the
fulfilment of, inter alia, the following conditions precedent:
9.1 approval by PPC shareholders in general meeting of the
necessary resolutions to implement the broad-based black
ownership initiative;
19
9.2 sanctioning by PPC shareholders in general meeting, of the
terms on which any financial assistance in terms of the
broad-based black ownership initiative is to be given;
9.3 the Scheme being approved by 75% of the PPC shareholders
present and voting at the Scheme meeting;
9.4 the High Court of South Africa sanctioning the Scheme in
terms of the Companies Act;
9.5 a certified copy of the Order of Court sanctioning the
Scheme being registered by the Registrar of Companies in
terms of the Companies Act;
9.6 approval, to the extent necessary, of all regulatory
authorities having jurisdiction in regard to the broadbased
black ownership initiative; and
9.7 the conditions of the loan agreements referred to in
paragraphs 4.2.1 and 4.2.2 above, and in respect of the
funding of the Indirect Trusts referred to in paragraph
4.1.1 above and The PPC Black Managers Trust referred to
in paragraph 4.1.2.1 above, being fulfilled or waived.
10. PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects set out below have been prepared
to assist PPC ordinary shareholders to assess the impact of the
broad-based black ownership initiative ("the transaction") on the
earnings ("EPS" and “diluted EPS”), headline earnings ("HEPS" and
“diluted HEPS”), net asset value ("NAV") and tangible NAV
("TNAV") per PPC ordinary share. The material assumptions are set
out in the notes following the table. These pro forma financial
effects have been disclosed in terms of the JSE Listings
Requirements and do not constitute a representation of the future
financial position of PPC on implementation of the transaction.
The pro forma financial effects are the responsibility of the PPC
board and are provided for illustrative purposes only.
For the 12 months ended 30 September 2007:
Before the
implementation
of the
transaction
After the
implementation
of the
transaction
Percentage
change
(cents) (cents)
EPS 266 138 (48%)
Diluted EPS 138 132 (5%)
HEPS 263 136 (48%)
Diluted HEPS 136 129 (5%)
NAV per share 437 234 (46%)
TNAV per share 433 230 (47%)
For the six months ended 31 March 2008:
Before the
implementation
After the
implementation
Percentage
change
20
of the
transaction
of the
transaction
(cents) (cents)
EPS 126 2 (98%)
HEPS 126 2 (98%)
NAV per share 242 24 (90%)
TNAV per share 239 20 (92%)
Notes:
1. The EPS, diluted EPS, HEPS, diluted HEPS, NAV and TNAV per PPC
ordinary share "Before the implementation of the transaction" are
based on the annual results for the year ended 30 September 2007
and interim results for the six months ended 31 March 2008.
2. The equity instruments issued to the SBP Funding SPV and the
CSG Funding SPV are treated as a separate class of equity for
accounting purposes. Consequently, the earnings, EPS, diluted
EPS, HEPS and diluted HEPS have been adjusted accordingly.
3. The PPC Black Managers Trust, The Current PPC Team Trust, The
Future PPC Team Trust, The PPC Black Independent Non-executive
Directors Trust and the Funding SPVs are consolidated for
accounting purposes.
4. The EPS and HEPS per PPC ordinary share "After the
implementation of the transaction" are based on the assumption
that the transaction was implemented on 1 October 2006 and
1 October 2007 respectively, and include the following:
4.1 An IFRS2 charge of R474.0 million and R467.8 million for the
12 months ended 30 September 2007 and the six months ended
31 March 2008, respectively, based on the closing PPC share price
on 21 August 2008 of R32.00 and the 30-day VWAP up to that date
of R31.32.
4.2 The finance cost applicable to the implementation of the
transaction for the respective periods above being based on the
relevant prevailing market rates.
4.3 Transaction costs associated with the implementation of the
transaction and recognised in profit or loss amounting to
R25.2 million.
4.4 For accounting purposes, the equity instruments issued to the
SBP Funding SPV and the CSG Funding SPV are treated in a manner
similar to that of an option. Consequently, these equity
instruments are being treated as potential ordinary shares for
the purposes of calculating diluted EPS and diluted HEPS.
4.5 Similarly, to the extent that share-based payment grants have
been made in terms of the Funding SPVs and Direct Trusts and the
Funding SPVs have settled their funding obligations, the
transaction will ultimately result in PPC shares vesting with the
Funding SPVs and beneficiaries respectively. Consequently, these
share-based payment grants are potential ordinary shares and are
being treated in a manner similar to that of an option for the
purposes of calculating diluted EPS and diluted HEPS.
5. The EPS and HEPS "After the implementation of the transaction"
are based on 499 619 868 weighted average PPC ordinary shares in
21
issue for the 30 September 2007 pro forma financial effects
(537 612 390 weighted average PPC ordinary shares in issue less
37 992 522 PPC ordinary shares treated as treasury shares on
consolidation).
6. The EPS and HEPS "After the implementation of the transaction"
are based on 497 853 313 weighted average PPC ordinary shares in
issue for the 31 March 2008 pro forma financial effects
(535 845 835 weighted average PPC ordinary shares in issue less
37 992 522 PPC ordinary shares treated as treasury shares on
consolidation).
7. The diluted EPS and HEPS "After the implementation of the
transaction" are based on 523 735 777 weighted average PPC
ordinary shares in issue for the 30 September 2007 pro forma
financial effects (499 619 868 weighted average PPC ordinary
shares in issue plus 24 115 909 potential PPC ordinary shares).
8. The NAV and TNAV per PPC share "After the implementation of
the transaction" are based on the assumption that the transaction
was implemented on 30 September 2007 and 31 March 2008,
respectively.
9. The NAV and TNAV per PPC ordinary share "After the
implementation of the transaction" are based on 499 619 868 PPC
ordinary shares in issue as at 30 September 2007 (537 612 390 PPC
ordinary shares in issue less 37 992 522 PPC ordinary shares
treated as treasury shares on consolidation of the Funding SPVs).
10. The NAV and TNAV per PPC ordinary share "After the
implementation of the transaction" are based on 497 853 313 PPC
ordinary shares in issue as at 31 March 2008 (535 845 835 PPC
ordinary shares in issue less 37 992 522 PPC ordinary shares
treated as treasury shares on consolidation of the Funding SPVs).
11. IMPORTANT DATES AND TIMES
The salient dates and times in respect of the broad-based black
ownership initiative are set out below:
2008
Court order issued to convene Scheme
meeting on or about
Tuesday, 14 October
Circular and notice of general meeting
posted to shareholders on or about
Thursday, 16 October
Last day to trade PPC shares on the
JSE in order to be recorded in the
register of members of PPC to vote at
the Scheme meeting on (note 2)
Thursday, 30 October
Record date for the Scheme meeting on Thursday, 6 November
Last day for receipt of proxies in
respect of the general meeting by
09:00 on
Friday, 7 November
Last day for receipt of proxies in
respect of the Scheme meeting by 09:30
on (notes 3 and 4)
Friday, 7 November
22
General meeting of shareholders at
09:00 on
Tuesday, 11 November
Scheme meeting to be held at 09:30 or
ten minutes after the conclusion or
adjournment of the general meeting,
whichever is the later, on
Tuesday, 11 November
Results of general meeting and Scheme
meeting released on SENS on or about
Tuesday, 11 November
Results of general meeting and Scheme
meeting published in the press on or
about
Wednesday, 12 November
Court hearing to sanction the Scheme
on
Tuesday, 25 November
IF THE SCHEME IS SANCTIONED AND
IMPLEMENTED:
Announcement on SENS regarding the
sanctioning of the Scheme on or about
Tuesday, 25 November
Announcement in the press regarding
the sanctioning of the Scheme on or
about
Wednesday, 26 November
Expected last day to trade in PPC
shares on the JSE in order for PPC
shareholders to be eligible to receive
the Scheme Consideration on
Friday, 5 December
Expected first day to trade in PPC
shares on the JSE ex-entitlement to
the Scheme Consideration under a new
ISIN on
Monday, 8 December
Expected last day to submit form of
surrender at 12:00 on
Friday, 12 December
Expected Record Date, being the date
on which PPC shareholders must be
recorded on the register of members of
PPC in order to be Scheme Participants
and so become entitled to receive the
Scheme Consideration, at 17:00 on
Friday, 12 December
Expected operative date of the Scheme,
at the commencement of trading on the
JSE on
Monday, 15 December
The Scheme Consideration is expected
to be transferred or posted (as the
case may be), and new share
certificates expected to be posted to
Scheme Participants whose documents of
title are received by the transfer
secretaries before 12:00 on the Record
Date on or about
Monday, 15 December
Or
failing receipt of documents of title
before 12:00 on the Record Date,
within five business days of receipt
thereof by the transfer secretaries
23
The Scheme Consideration is expected
to be credited to the dematerialised
Scheme Participants' accounts held at
their CSDP or broker and share
balances updated on
Monday, 15 December
Notes:
1. The abovementioned times and dates are South African times
and dates, and are subject to change. Any such change will
be published on SENS and in the press.
2. Shareholders are advised that as trading in shares on the
JSE is settled within the Strate environment five business
days following the trade, shareholders acquiring
dematerialised shares after Thursday, 30 October 2008 will
not be eligible to vote at the Scheme meeting.
3. If a form of proxy for the Scheme meeting is not received
by the time and date shown above, it may be handed to the
chairperson of the Scheme meeting by no later than ten
minutes before the Scheme meeting is due to commence.
4. If the date of the general meeting is adjourned or
postponed, forms of proxy must be received by no later than
48 hours prior to the time of the adjourned or postponed
general meeting, provided that for the purposes of
calculating the latest time by which forms of proxy must be
received, Saturdays, Sundays and public holidays will be
excluded.
5. If the date of the Scheme meeting is adjourned or

 
 
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