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PPC announces 15% progressive Broad-Based BEE transaction for R2.7bn

Community Service Groups, Employees, Education and Industry Associations Trusts
and Strategic Black Partners – many millions of stakeholders positively impacted

PPC is delighted to unveil its broad-based black economic empowerment (“BBBEE”) transaction.  The transaction will result in a 15% black shareholding in the ordinary share capital of PPC.

It is very broad-based and includes communities, construction industry associations and education trusts, community service groups, (CSGs) and strategic black partners (SBPs) as well as employees and managers of PPC. 

PPC believes that the transaction embraces the true spirit of empowerment whilst taking cognisance of the Mining Charter and the DTI Codes as well as the company’s broad transformation objectives.  Furthermore, this transaction will directly benefit an estimated 3,5 million people in South Africa, and many more indirectly in terms of their dependants. The vast majority of these stakeholders are black individuals and communities.

John Gomersall, CEO of PPC commented: “This is a historic milestone for the company and the culmination of processes started many years ago. Today heralds a significant achievement by the company as it reaches a key empowerment objective at the equity level. We set out to ensure that the structure of the deal was as broad-based as possible, benefiting mainly black South African stakeholders.”

Employees, an educational trust, a construction industry association trust and two community service groups will be allocated the largest portion of shares at 8.15% of PPC’s ordinary issued share capital after the implementation of the BEE transaction. Strategic black partners will be allocated 7%.
A Construction Industry Associations Trust has been established to benefit existing and new black  construction industry and related associations. The income of this trust will be allocated to specific projects which benefit previously disadvantaged individuals who are members of these Associations.

Furthermore, an external trust has been established to develop skills and provide benefits to primarily black individuals with educational and skills needs in the cement, lime and aggregates manufacturing, mining, construction and related industries.  

PPC internal trusts for employees, black managers and a small allocation to non-executive directors will be created to reward them for their years of creating value for the shareholders. An internal trust to provide benefits to the families of PPC employees has also been established. At least 85% of the benefits from both external and internal trusts will be allocated to black people.

The trusts will acquire 6.65% of PPC shares from existing shareholders through a scheme of arrangement in terms of Section 311 of the Companies Act.

PPC will issue 8.5% new shares to the strategic black partners and community service groups.

The strategic black partners were chosen because of their experience and involvement in the wider construction and mining arena and their ability to add value to PPC. Most of them have broad-based black components such as ‘black women’ and ‘youth’ among their stakeholders. 

PPC has welcomed two community service groups (CSGs) to participate in the BEE transaction with a stake of 0.75% each. The two groups selected are the Shalamuka Foundation and the Disability Empowerment Concerns Trust  who have together contributed R5,4m of their own equity. 

The Shalamuka Foundation was formed in 2006 to raise long-term sustainable funding for the highly regarded Penreach programme, which provides teacher skills workshops to about 2,200 school teachers in 900 schools. 

The Disability Empowerment Concerns Trust, the sole shareholder of the DEC Investment Holding Company (Proprietary) Limited was established in 1996 by organisations representing people with disabilities. Their activities touch over 2 million people of whom more than 85% are black.

There are four strategic black partners, being Nozala, Peu, iLima Portland Consortium and Capital Edge Cement Consortium.

Nozala, is a broad-based women’s empowerment group, formed in 1996 and led by Salukazi Dakile-Hlongwane.  Nozala was part of PPCs first BEE transaction when it took a 50% stake in Afripack at the subsidiary level.

Salukazi said: “We have worked with PPC for some years and we are excited to participate in this transaction. It means we are further strengthening our close relationship with the company and it also increases our determination to contribute to the success of PPC.”

Peu is led by Peter Malungani and was established in 1996. It is majority black owned and managed with a long-term view on investments focused on the infrastructure and construction sectors. Peu has a successful track record in providing investment assistance, and will contribute towards PPC by leveraging its strategic relationships and with business development initiatives.

Peter said: “This is a natural fit for us given our sector focus.  PPC is committed to the principles of BBBEE and we are delighted to be selected as one of the strategic partners in the transaction.  We have also enjoyed a mutually beneficial relationship going back 15 years.”

iLima Portland Consortium comprises of iLima Group (Pty) Ltd, key shareholders, employees and strategic partners.  iLima is a fully empowered investment company focused on infrastructure development projects, construction and project management, power generation and mining exploration.  iLima is led by Mandla Gantsho and also has youth and black women components.

Mandla commented: “We are pleased that PPC has selected us as a partner for this momentous transaction. We have already embraced the prevailing spirit, work ethic and determination within PPC to ensure that its businesses are profitable into the future and that development opportunities for young and female employees continue to be developed."

The Capital Edge Cement Consortium (CECC) is a broad-based group formed in August 2006 primarily for the purpose of the Strategic Black Partnership with PPC.  It is diverse with strong women and youth components and shareholder representation in all nine provinces.  Its vision is to play a leading role in BBBEE through participation in initiatives that have the potential to create employment and skills transfer. The consortium is led by Jerry Vilakazi, (CEO of BUSA and entrepreneur) with key management in Dr. Rejoice Simelane, Chama Kamukwamba, and Tiisetso Tsukudu.  Together with the Black Management Forum (BMF) the CECC is committed to human capital transformation and will further assist PPC in achieving its transformation objectives and proactively identify new business opportunities in sub-Saharan Africa.

Jerry said: “Many black people will benefit through our participation in this transaction. We will seek to add value by deploying our strategic relationships as the company continues to grow. We look forward to assisting PPC in identifying and accessing black skills and talent.”

Gomersall added: “It was important that we chose strategic black partners that can add value to PPC. We believe we have achieved a powerful and balanced combination. All participants in this transaction will be aligned with and contribute to PPC’s growth into the future.”

South African employees of PPC, nearly 85% of whom are black, are to benefit substantially from the transaction.  Employees will be allocated 1.07% of the shares in the transaction.  Additionally, current and future black managers will participate in 1.83% of the equity. 
John Gomersall said: “ The success of our business lies in the hands of our current and future employees and in the communities in which we operate and it is vital that their interests are aligned with that of the company. Their participation in this BBBEE transaction is therefore a cornerstone.  Additionally, it is essential that we are able to attract and retain future black management.”

Existing black non-executive directors, namely Joe Shibambo, Zibusiso Kganyago and Ntombi Langa-Royds, will be allocated 0.05% between them. 


PPC will facilitate the transaction in a number of ways. There will be contributions made to various trusts to acquire shares for the benefit of current and future employees and non-executive directors. The funding of the Construction Association and PPC Education, Community, Team Benefit and the Black Managers Trusts is through a preference share funding structure.  New PPC shares to be issued to the SBP consortium are funded by a credit sale. All shareholdings have various vesting conditions and sale restriction periods.  

The funding in respect of the CSG and SBP components of the broad-based black ownership initiative amounting to approximately R1.5 bn is underwritten by the Standard Bank of South Africa Limited.

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 R1.5bn of long-term debt through the CSG PPC Loan and the SBP PPC Loan, which the company intends using to replace this short-term debt.

The IFRS2 share-based payment charge is R557.4m and equates to 3.24% of PPC’s market capitalisation of R17.2bn as at close of business on 21 August 2008.

The initial earnings and dividend dilution is 5.9% (8.5% of new shares issued reduced by 2.6% of PPC shares already bought back and held by PPC’s Treasury). It is PPC’s intention to buy back further shares when appropriate to limit dilution further.

PPC’s objective is to ensure that its South African businesses achieve a Level 4 Empowerment rating in terms of the BBBEE Codes of Best Practice by 2009 and the company is on track for this following the implementation of this transaction in December and its other transformation activities. 

Gomersall concluded:Empowerment and transformation is at the heart of PPC and this is a significant stride towards broad-based equity ownership.Today is not the end of a process but the dawn of a new chapter in PPC’s 116 year history. ”

This BBBEE transaction is subject to the approval of shareholders at a general and a scheme meeting anticipated to be held on 11 November 2008.  The effective date of the BEE transaction is expected to be on or about 15th December 2008.

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