BEE deal burns Sasol shares
BUSINESS REPORT / 21 SEPTEMBER 2017, 06:00AM / LUYOLO MKENTANE AND KABELO KHUMALO
JOHANNESBURG - The share price of petrochemicals giant Sasol on Wednesday tanked 7.32% after it announced the replacement of its debt-ridden black empowerment scheme Inzalo and replaced it with its empowerment structure Khanyisa in a deal it values at R21bn.
The Sasol Inzalo black empowerment scheme, which was valued at R28bn when it was implemented in 2008, also saw its share price decrease 16.17% yesterday. The JSE launched a BEE board in 2011.
Sasol Inzalo, which is expected to unwind in June 2018, has a R11.9bn debt. In disbanding Inzalo, Sasol will write off the internal debt of the scheme, which Sasol itself financed. It will then continue to repay the banks until Inzalo's debt is serviced.
Sasol joint president and chief executive Bongani Nqwababa says the company embraces transformation and is committed to contributing meaningfully to “sustainable transformation as we accelerate this journey across Sasol”. Photo: Itumeleng English.
Sasol’s new empowerment structures followed after a similar announcement last week by Impala Platinum, which wrote off R10bn loaned to Royal Bafokeng for an empowerment transaction.
Yesterday, Sasol bosses said they hoped the Khanyisa B-BBEE ownership structure, which would be tabled for shareholder approval at their annual general meeting in November, would achieve black ownership of at least 25% in Sasol.
Sasol’s joint presidents and chief executives, Stephen Cornell and Bongani Nqwababa, said the new ownership structure was designed to ensure it led to “sustainable ownership of Sasol by black South African shareholders”.
Nqwababa said they embraced transformation and were committed to contributing meaningfully to “sustainable transformation as we accelerate this journey across Sasol”.
Explaining how it would fund Inzalo’s unwinding, Sasol undertook to ensure that funding companies could settle their R12bn debt to third party funders. The funding companies needed to sell their Sasol shares to settle the outstanding debt, and any resultant debt shortfall “will need to be covered by Sasol”.
Sasol proposed to purchase the Sasol Inzalo shares from the funding companies and cancel them. It would also “inject” any additional funds required into funding companies to settle costs and any remaining funding shortfall.
Inzalo comprised four components: the Sasol Inzalo employee trusts, the Sasol Black Economic Empowerment ordinary shareholders, the Sasol Inzalo Groups funded element and the Sasol Inzalo Foundation. The ill-fated Inzalo scheme failed to live up to expectations as a result of the global financial crisis of 2008, which saw oil prices falling by more than 40%.
However, the Sasol chief executives said it would continue to monitor all available options to finance the debt. It was expected that there would be no distribution of Sasol shares to participants when Inzalo ends next year, “given the closing Sasol ordinary share price of R390 on September 4”, the company said.
Nqwababa said Sasol was well placed to achieve at least 25% black ownership and that a proportional share of the dividend stream from Sasol South Africa would be used to repay the funding cost.
“This means Sasol Khanyisa’s success is not dependent on Sasol Limited’s share price fluctuations. As no external funding will be used, there will be no cash outflows from Sasol,” he said.
The company said participants in the Sasol Khanyisa employee share ownership plan would receive a debt-free share grant of Sasol ordinary shares and Sasol shares listed on the empowerment segment of the JSE worth R100 000.
These shares, subject to taxation, would become theirs to keep or sell at the end of a three-year period in 2021. Participating employees were also eligible to receive a pro rata portion of dividends received by the Sasol Khanyisa trust during the three-year period. It further stated that eligible participants in Sasol Khanyisa would comprise Sasol’s qualifying employees, existing Sasol Inzalo Public and Groups shareholders, and existing black Sasol shareholders that own shares listed on the empowerment segment of the JSE.
At the end of the 10 year period and once the vendor funding has been settled, Sasol Khanyisa public shares will be exchanged for SOLBE1 shares listed the empowerment segment of the JSE.
LINK - https://www.iol.co.za/business-report/bee-deal-burns-sasol-shares-11296585