Archive for category Ownership
We come across hundreds of black owned companies, all hoping to invest in your business. They tout themselves as being the ideal BEE partner. We have seen hundreds of deals, and companies advertising their new BEE partner. Our usual approach is to calculate the points they will earn as a result of the deal.
In addition we also look to see if this ideal BEE partner themselves have a BEE certificate, and invariable they do not. As far as I am concerned a company that sets itself out to be a BEE Partner, should also make the effort to obtain their own BEE certificate. Unfortunately this seldom happens. We could name hundreds of companies that think they are an ideal BEE partner, because they are majority black owned, but if they don’t bother to get their own BEE certificate, I have to suspect that they are not genuine about transformation and B-BBEE. If they were genuine surely they would want the whole world to know what their own BEE credentials are. In many cases they have not even bothered to do a self-assessment.
Often the company web site talks about empowerment, but seldom do they put their own BEE Certificate on the site, yet they use their “empowerment” credentials to get business, and to make deals.
If you do not have a BEE certificate showing at least level 4, you do NOT have good empowerment credentials.
Try the following exercise: Google “Black owned investment company”, and then look at each of their web sites, and see how many businesses are hoping to be BEE partners, but have no BEE certificate on their site.
The Business Report has conducted an interview with Sandile Zungu, a well known businessman and partner in the ArcelorMittal deal. He is also a member of the BEE Council.
Some of the questions asked of him was:
BR: Some of the BEE score agencies rate it as not a particularly good deal with low scores.
SZ: I suspect that they have jumped the gun, in terms of the value in empowerment hands. I doubt there are many deals that would surpass this one. Number one, the empowerment shareholders, in terms of how the deal has been structured, is guaranteed the minimum returns. And most of the empowerment deals there is almost like speculation as to in five years’ time, in seven years’ time, how much money am I going to make? When the share price collapses, a deal that was deep in the money suddenly is getting wrecked. We have removed that uncertainty in this transaction. And I think that’s a very positive attribute, so it’s very empowering. I think also we have a further share in the upside in the share price of ArcelorMittal as it goes up, and we expect it to go up, of course up to a certain cap. We’ve agreed to that. But there’s further upside and that’s very important for empowerment, and therefore it’s a very empowering deal. Now the people who have actually gone further to score it using the balanced score card, I suspect they have jumped the gun in my opinion. Because a balanced scorecard would want to explore the issues of contribution towards (indistinct)… We want to explore the issues of skills development, management control. I’m not so sure how those have done that without having spoken to us as Ayigobi as well as the management of ArcelorMittal.
BR: Have you done your own scorecard or had it done on your behalf?
SZ: The transaction is not completed, that’s the problem. As ArcelorMittal has indicated, they have only now just commissioned a rating agency to do their scoring. This thing is not an overnight thing, it’s a process, and in the fullness of time I think people will be very pleased indeed that this transaction would score highly.
Our comment as the BEE consultancy that broke this story:
Yes, of course we did a quick assessment. It’s not jumping the gun, but doing a quick analysis, in the interests of B-BBEE and the shareholders.
What continues to give us concern is that ArcelorMittal did not evaluate the deal BEFORE signing it, to maximise the points. To state that they have now called in a rating agency is of course the wrong organisation to call in. A verification agency’s job is to verify the points earned, not award and calculate the points for them. They should have done this already! The Verification Manual repeatedly mentions that the task of the verification agency is to RE-CALCULATE the score, clearly implying that the measured entity should have a score, and evidence or suitable documentation to justify that score. If they don’t then zero points must be allocated or else they could be accused of fronting!
The most concerning part is Mr Zungu is a member of the BEE Council, and should know all this.
The ArcelorMittal deal was done in order to comply with the B-BBEE codes. If that is their intention they have done a very bad job.
Based on their published SENS announcement we have calculated the points they could earn this year, and made various estimates where we felt it appropriate.
Ownership is made up of 23 points.
Voting rights of black people in the organization: Target 25% plus 1 vote: 3 points
The participants hold 26% of the shares, though some of the participants are not black as defined (the Gupta family). If the Gupta family owns 10% of the BEE SPV consortium that is a 21% shareholder then effective ownership would be 23.9% and not 26%. However the modified flow through principle applies, ensuring that targets are reached and 3 points earned.
Points earned: 3
Voting rights of black women the organization: Target 10% plus 1 vote: 2 points
The BEE SPV has stated that 25% of its shareholding will be black women, and using the flow through principle black women will own 5.25% of the business.
The ESOP is reserved for employees and holds 5% of the business. If black women account for half, there would be 2.5% black women ownership, though based no the ArcelorMittal business it is reasonable to estimate that 80% of its black employees are male.
Therefore we estimate that there is 6.5% black women ownership, and 1.3 points will be earned
Points earned: 1.3
Economic interest of black people in the enterprise: Target 25%: 4 points
The participants will only earn 5% of ordinary dividends and 0% of extraordinary dividends for at least 5 years. Economic interest, using the modified flow through principle will be less than 5% of 26%=1.3 % out of a target of 25%. We would estimate 0.21 points will be earned for economic interest, though the key principle of substance over form suggests that zero economic interest will be earned.
Points earned: 0.21
Economic interest of black women in the enterprise: Target 10%: 2 points
Based on 6.5% black women ownership who receive less than 5% of dividends, economic interest will be less than 0.325% and 0.06 points earned.
Points earned: 0.06
Economic interest of black natural people in the organization: Target 2.5%: 1 point
This would include employee share ownership schemes, and it is likely that some of the participants in the BEE SPV fall within this category. We estimate that 6% of the shareholders fall into this category but they only earn 5% of the economic interest and 0.1 point earned.
Points earned: 0.01
Ownership Fulfillment: 1 point
Ownership fulfillment has not taken place so zero points are earned.
Points earned: 0
Net Value: 7 points
Net value is based on economic interest and the repayment schedule. Payment would have been made in full, but economic interest is only 1.3% out of a target of 25%.
Points earned: 0.36
Involvement in the ownership of the enterprise of black new entrants: Target 10%: Points 2
The ESOP is likely to be black new entrants, and part of the consortium is likely to be new entrants. Out of the 26% ownership we could expect 8% to be black new entrants. However points are earned only based on economic interest. Economic interest of the entire consortium is only 1.3%, so the share of black new entrants is about 0.04% out of 10%
Points earned: 0.01
Involvement in the ownership of the enterprise of ESOPs: Target 10%: Points 1
This is also based on economic interest, and less than 0.01 points will be earned.
Points earned: 0
Grand Total: 4.95 points out of 23
Not many points….
ArcelorMittal is creating a new business OPCO which will carry on business in South Africa as Mittal.
South African assets of ArcelorMittal will be transferred to OPCO.
OPCO is effectively the new ArcelorMittal in South Africa.
OPCO will be owned by:
ArcelorMittal – 74%
BEE SPV – 21% (a BEE consortium)
ESOP Newco – 5% (an employee share options scheme)
OPCA has share capital of R1000, and has 1000 shares in issue.
BEE SPV will subscribe to 210 “A” shares of OPCO at a subscription price of R1 per share
ESOP Newco will subscribe to 50 “B” shares of OPCO at a subscription price of R1 per share
The BEE SPV is a consortium of:
ZICO SPV (led by Sandile Zungu);
Mabelindile Archibald Luhlabo;
Pragat Investments (Jagdish Parekh);
Prudence Zerah Mtshali;
Phemelo Ohentse Robert Sehunelo;
Zebo Lesego Edwin Tshetlho;
Oakbay Investments (Gupta family members); and
Mabengela Investments (led by Duduzane Zuma).
Approximately 25% of the shareholding in BEE SPV remains to be allocated to a women-led consortium.
It should be noted that Oakbay Investments is the Gupta family, and Indian national, and therefore not “black” as defined in the codes.
The ESOP Newco is a special purpose vehicle for facilitating an employee share ownership plan in relation to OPCO shares
All parties will have full voting for the duration of the ownership of the shares.
The “A” shares will receive 5% of the ordinary dividends per share and nothing on extraordinary dividends.
The “B” shares will also only receive 5% of the dividends until the fifth year of the deal.
This implies that there is effectively zero economic interest.
The BEE SPV will be allowed to sell the shares back to OPCO at any time after four years, provided that ArcelorMittal South Africa receives confirmation from the Department of Trade and Industry and the Department of Mineral Resources, that OPCO shall be permitted to continue to recognise the BEE rating afforded to it through the Transaction.
This clause probably refers to the continued recognition of ownership after loss or sale of shares, or what some ignorant people refer to as “once empowered, always empowered”. The true situation is that the codes do not give the dti discretion to permit OPCO to continue to recognize the BEE rating as a result of the transaction. DMR is similarly excluded from the decision which is clearly covered in the codes, section 3.5 of statement 100. What they do say is at most continued recognition cannot contribute more than 40% of the score on the ownership scorecard. The repurchase of the share therefore will not happen with the codes as they are. This is a bit of a concern that this clause was inserted into their SENS announcement considering that Sandile Zungu is a member of the BEE Council and should have known better.
Repurchase of Shares:
If the BEE SPV does not exercise its put option (which as explained above is impossible for them), then OPCO has the right to repurchase some of their shares from years 5 to 20. The number of shares to be repurchased will depend on various factors including the dividends foregone over the previous years – presumably as a mechanism to use the dividends to pay for the initial cost of the shares.
ACL – Arcelormittal South Africa – Terms of Arcelormittal South Africa Black
Economic Empowerment ownership transaction and further cautionary announcement
ARCELORMITTAL SOUTH AFRICA LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1989/002164/06)
Share code: ACL
ISIN : ZAE000134961
(”ARCELORMITTAL SOUTH AFRICA”)
TERMS OF ARCELORMITTAL SOUTH AFRICA BLACK ECONOMIC EMPOWERMENT (”BEE”) OWNERSHIP
TRANSACTION AND FURTHER CAUTIONARY ANNOUNCEMENT
* In line with ArcelorMittal South Africa`s commitment to transformation objectives as enunciated in the country`s empowerment legislation, the finalisation of a transaction providing for equity ownership in respect of 26% of ArcelorMittal South Africa`s operating assets through BEE SPV and ESOP Newco, with an aggregate transaction value of R 9.075 billion.
* Facilitation by ArcelorMittal South Africa of participation by BEE SPV and ESOP Newco.
* Broadening and transforming ownership base in respect of ArcelorMittal South Africa`s operating assets.
* BEE SPV participation through the Ayigobi Consortium led by Sandile Zungu, which includes new entrants, women, youth and strategic groups. ESOP Newco will consist of an employee share ownership plan.
* Contribution to broad-based BEE equity ownership complying beyond the 10 years and 25% target as required by the Broad-Based BEE Codes of Good Practice.
1.1 Shareholders of ArcelorMittal South Africa (”Shareholders”) are referred to the announcement dated 19 September 2008 in which Shareholders were informed that ArcelorMittal South Africa is involved in negotiations to give effect to a BEE transaction.
Such announcement was withdrawn on Thursday, 18 December 2008 due to the economic climate and market conditions prevailing at the time. More recently, and on Tuesday, 30 March 2010, ArcelorMittal South Africa announced to Shareholders via the Stock Exchange News Service (”SENS”) and in the press that the
board of directors of ArcelorMittal South Africa has recommenced discussions pertaining to a 26% broad-based BEE ownership transaction which includes an employee share ownership plan (”ESOP”) (the “Transaction”).
1.2 These discussions have culminated in the conclusion of a Subscription and Shareholders` Agreement on 9 August 2010
between ArcelorMittal South Africa and Lexshell 771 Investments (Pty) Ltd (”BEE SPV”) and Lexshell 769 Investments (Pty) Ltd (”ESOP Newco”), in relation to ArcelorMittal South Africa Operations (Pty) Ltd (”OPCO”) (the “Subscription and Shareholders` Agreement”), to give effect to the Transaction.
In terms of the Subscription and Shareholders` Agreement and subject to ArcelorMittal South Africa shareholder approval and fulfilment of further conditions precedent set out in paragraph 3.10 below by Monday, 28 February 2011 -
1.2.1 ArcelorMittal South Africa shall transfer its operating assets to OPCO, a wholly owned subsidiary of ArcelorMittal South Africa which has not previously traded, in return for further OPCO ordinary shares;
1.2.2 BEE SPV, a special purpose vehicle through which the BEE participants will hold an indirect equity interest in OPCO, shall subscribe for 210 “A” ordinary shares in the capital of OPCO at a subscription price of R 1 per share, constituting 21% of OPCO`s entire issued share capital; and
1.2.3 ESOP Newco, a special purpose vehicle for facilitating an employee share ownership scheme in respect of OPCO shares, shall subscribe for 50 “B” ordinary shares in the capital of OPCO at a subscription price of R 1 per share, constituting 5% of OPCO`s entire issued share capital.
1.2.4 As a result of the aforegoing transactions, the issued ordinary share capital of OPCO will be held as follows-
188.8.131.52 74% thereof by ArcelorMittal South Africa;
184.108.40.206 21% thereof by BEE SPV; and
220.127.116.11 5% thereof by ESOP Newco.
1.3 At the closing price of R 87.00 per ArcelorMittal South Africa ordinary share on Monday, 2 August 2010, the Transaction has a value of R 9.075 billion.
2 RATIONALE FOR AND PRINCIPLES OF THE TRANSACTION
2.1 In line with the BEE objectives enunciated by the Broad-Based Black Economic Empowerment Act and the Broad-Based BEE Codes of Good Practice (”Codes”), the Transaction, if implemented, will allow a broad-based group of Black People (as defined in the Codes), including women, youth and Black and other employees of ArcelorMittal South Africa and subsidiaries of ArcelorMittal South Africa, to benefit from an aggregate 26% equity ownership in respect of ArcelorMittal South Africa`s operating assets.
2.2 In structuring the Transaction, ArcelorMittal South Africa was guided, inter alia, by the following principles -
2.2.1 the vesting in BEE SPV and ESOP Newco, representing the interests of the BEE participants and employees, from inception, of full voting rights in respect of 26% of the operating assets of ArcelorMittal South Africa;
2.2.2 ensuring that a broad-based group of BEE participants acquires the 21% economic interest in ArcelorMittal South Africa`s operating assets, by requiring that such group contains the relevant elements of; broad-based, black women and black new entrants participation (having reference to the requirements of the Codes in this regard) (”Minimum Required B-BBEE Shareholding Composition”);
2.2.3 broadening ownership of ArcelorMittal South Africa operating assets amongst Black and other employees of ArcelorMittal South Africa and subsidiaries of ArcelorMittal South Africa, through ESOP Newco`s acquisition of a 5% economic interest in OPCO;
2.2.4 achieving a sustainable BEE transaction at an acceptable economic cost to Shareholders; and
2.2.5 ensuring compliance with the letter and spirit of the Codes.
3 TRANSACTION PARTICULARS
3.1 Ownership Structure
Post implementation of the Transaction, the operating assets of ArcelorMittal South Africa shall be owned by OPCO, and the issued share capital in OPCO shall be held as follows:
3.1.1 74% thereof by ArcelorMittal South Africa;
3.1.2 21% (”A” Ordinary Shares) by BEE SPV; and
3.1.3 5% (”B” Ordinary Shares) by ESOP Newco.
3.2 BEE SPV is to be controlled by Ayigobi Consortium, a consortium led by Sandile Zungu, which consortium provides for the following broad-based elements/categories of empowerment: women, youth and strategic groups. The BEE participants shall include the following entities/individuals
3.2.1 ZICO SPV (led by Sandile Zungu);
3.2.2 Mabelindile Archibald Luhlabo;
3.2.3 Mojalefa Mbete;
3.2.4 Pragat Investments (Jagdish Parekh);
3.2.5 Prudence Zerah Mtshali;
3.2.6 Phemelo Ohentse Robert Sehunelo;
3.2.7 Zebo Lesego Edwin Tshetlho;
3.2.8 Oakbay Investments (Gupta family members); and
3.2.9 Mabengela Investments (led by Duduzane Zuma).
3.3 Approximately 25% of the shareholding in BEE SPV remains to be allocated to a women-led consortium.
3.4 Transfer to OPCO of ArcelorMittal South Africa Operating Assets
3.4.1 OPCO is a wholly owned subsidiary of ArcelorMittal South Africa which has not previously traded. ArcelorMittal South Africa confirms that the Articles of Association of OPCO will be amended to conform to Schedule 10 of the JSE Listings Requirements. At inception of the Transaction, OPCO`s authorised share capital is R1 000 consisting of 1 000 ordinary par value shares of R1 each, of which 1 ordinary share is in issue to ArcelorMittal South Africa. ArcelorMittal South Africa will transfer the ArcelorMittal South Africa operating assets to OPCO in return for the allotment and issue to ArcelorMittal South Africa of a further 739 ordinary shares, credited as shares fully paid up.
3.4.2 The operating assets to be transferred pursuant to giving effect to the Transaction shall be:
18.104.22.168 all of the existing operating assets, excluding the following: 100% shareholding in and loan claim against Vicva Investments and Trading Nine (Proprietary) Limited; 100% shareholding in and loan claim against Iscor Landgoed (Proprietary) Limited; 100% shareholding in and loan claim against Pybus Fifty-Seven (Proprietary) Limited and 100% shareholding in ArcelorMittal South Africa Investments and Trading One Limited; and
22.214.171.124 transferred at the book value thereof, amounting to R 21.263 billion, based on the most recent published financial results of ArcelorMittal South Africa (as at 30 June 2010) and the assumption that all of the conditions in relation to the Transaction will be fulfilled.
3.5 Introduction of BEE SPV and ESOP Newco
Subscription for “A” and “B” Ordinary Shares
3.5.1 210 “A” ordinary shares (constituting 21% of OPCO`s share capital) will be created in the share capital of OPCO, by converting 210 authorised, unissued ordinary shares into “A” ordinary shares, having the rights and privileges set out in paragraph 3.7 below.
3.5.2 50 “B” ordinary shares (constituting 5% of OPCO`s share capital), will be created in the share capital of OPCO, by converting 50 authorised,
unissued ordinary shares into “B” ordinary shares, having the rights and privileges set out in paragraph 3.8 below.
3.5.3 BEE SPV (a company newly established to hold the BEE participants` indirect shareholding in OPCO) will subscribe for the “A” ordinary shares and ESOP Newco (a special purpose vehicle for facilitating an employee share ownership plan in relation to OPCO shares) for the “B” ordinary shares, in both instances at par value. The entities and individuals referred to in paragraph 3.2 above, will be included as the recipients of dividends paid by BEE SPV from the income it receives in respect of dividends on the “A” ordinary shares paid by OPCO from time to time, subject to the limitation detailed in paragraph 126.96.36.199.1 below.
3.5.4 Employees of ArcelorMittal South Africa and subsidiaries of ArcelorMittal South Africa, will be the recipients of dividends paid by ESOP Newco from income it receives in respect of dividends on the “B” ordinary shares, subject to the limitation detailed in paragraph 3.8.1 below.
3.6 Exit by BEE SPV and ESOP Newco at the end of the Transaction
3.6.1 BEE Put Option
188.8.131.52 ArcelorMittal South Africa shall grant the shareholders of BEE SPV (”SEPs”) the right and option (”Put Option”), to require that ArcelorMittal South Africa purchases from the SEPs collectively, all of the shares held by the SEPs in the capital of BEE SPV (”Put Shares”), inter alia, on the following terms and conditions -
184.108.40.206.1 the Put Option shall be exercisable by the SEPs at any time after the later of four years from the effective date of the Transaction (”Effective Date”) and ArcelorMittal South Africa receiving confirmation from the Department of Trade and Industry and the Department of Mineral Resources, that OPCO shall be permitted to continue to recognise the BEE rating afforded to it through the Transaction, notwithstanding the exit of the SEPs (”Confirmation”), provided that if the Confirmation is not received by the fourteenth anniversary of the Effective Date, the Put Option shall be exercisable regardless;
220.127.116.11.2 the purchase price payable by ArcelorMittal South Africa for the Put Shares (”Put Price”), shall be calculated in accordance with a predetermined formula which considers, inter alia, the inherent value of shares in BEE SPV, determined by reference to the 30-day volume weighted average price (”VWAP”) of an ArcelorMittal South Africa ordinary share; and
18.104.22.168.3 subject to satisfaction of any applicable regulatory requirements, the aggregate Put Price, at the election of ArcelorMittal South Africa, shall either be paid in cash or discharged through the allotment and issue by ArcelorMittal South Africa to the SEPs of fullypaid ArcelorMittal South Africa ordinary shares.
3.6.2 OPCO`s Repurchase Right in respect of “A” Ordinary Shares
22.214.171.124 The “A” ordinary shares will be issued by OPCO to BEE SPV, subject to the following conditions -
126.96.36.199.1 the right to receive only 5% of the ordinary dividends and none of the extraordinary dividends declared in respect of the “A” ordinary shares (”Trickle Dividend”), during the period commencing on the date of issue of such shares (”Issue Date”) and ending on the date of their repurchase as detailed in paragraph 188.8.131.52.2 below (”Transaction Term”); and
184.108.40.206.2 provided that at such time the SEPs have not yet exercised the Put Option referred to in paragraph 3.6.1 above, OPCO will have the right (”"A” Repurchase Right”) at any time during years 5 to 20 from the Effective Date, to repurchase from BEE SPV, a certain number of the “A” ordinary shares at their par value (the “”A” Repurchase Shares”). The “A” Repurchase Right will be automatically exercised at the end of year 20. The number of the “A” Repurchase Shares will be calculated in
accordance with a predetermined notional funding formula which considers the following -
220.127.116.11.2.1 the 30-day VWAP of an ArcelorMittal South Africa ordinary share
at the end of the Transaction Term; and
18.104.22.168.2.2 the dividends not paid to BEE SPV due to the suspension of dividend rights attaching to the “A” ordinary shares during the
Transaction Term as described in paragraph 22.214.171.124.1 above.
126.96.36.199 Immediately after the repurchase by OPCO of the “A” Repurchase Shares, the suspension on dividend rights in respect of the remaining “A”
ordinary shares not repurchased by OPCO will cease, to the effect that the “A” ordinary shares will automatically become ordinary shares and
carry identical rights and benefits to the OPCO ordinary shares held by ArcelorMittal South Africa. At this stage, OPCO will be entitled to repurchase the remaining “A” ordinary shares at market value, with the purchase consideration to be settled, at the election of ArcelorMittal South Africa and subject to any applicable regulatory
requirements, in cash or through the issue by ArcelorMittal South Africa of fullypaid ArcelorMittal South Africa ordinary shares.
3.6.3 OPCO`s Repurchase Right in respect of “B” Ordinary Shares
188.8.131.52 The “B” ordinary shares will be issued by OPCO to ESOP Newco, substantially on the same conditions as those applying to the “A”
ordinary shares, save that -
184.108.40.206.1 the 5% Trickle Dividend will be paid until the fifth anniversary of the Issue Date; and
220.127.116.11.2 OPCO will have the right to repurchase, after the fifth anniversary of the Issue Date, a certain number of the “B” ordinary shares (the “”B” Repurchase Shares”) at their par value, with the number of the “B” Repurchase Shares being calculated in accordance with an agreed notional funding formula.
18.104.22.168 After repurchase by OPCO of the “B” Repurchase Shares, the suspension on dividend rights in respect of the “B” ordinary shares not repurchased by OPCO will cease and at this time, OPCO will be entitled to repurchase the remaining “B” ordinary shares at market value, with the purchase consideration to be settled by ArcelorMittal South Africa, on the same basis as in paragraph 22.214.171.124 above.
3.7 Rights and Privileges attaching to Class “A” Ordinary Shares in OPCO
The 210 “A” ordinary shares in the capital of OPCO will have the following rights and privileges -
3.7.1 from the Issue Date until exercise by OPCO of the “A” Repurchase Right (the “Suspension Period”), the right of the holder thereof (BEE SPV) to receive ordinary dividends and/or extraordinary dividends, will be limited to 5% of the amount of annual dividends declared in respect of the “A” ordinary shares;
3.7.2 BEE SPV`s right to receive the balance of dividends accrued but not received in respect of the “A” ordinary shares during the Suspension Period, will be taken into account in the formula referred to in paragraph 126.96.36.199.2 above; and
3.7.3 apart from the suspension of dividend rights (which shall cease at the end of the Suspension Period), the “A” ordinary shares will have
exactly the same rights (including voting rights) as, and in all respects rank pari passu with, the 740 OPCO ordinary shares held by ArcelorMittal South Africa.
3.8 Rights and privileges attaching to Class “B” Ordinary Shares in OPCO
The 50 “B” ordinary shares in the capital of OPCO will have the following rights and privileges -
3.8.1 for a period of five years from the date of their issue, the right of the holder thereof (ESOP Newco) to receive ordinary dividends and/or
extraordinary dividends will be limited to 5% of the amount of annual dividends declared in respect of the “B” ordinary shares;
3.8.2 ESOP Newco`s right to receive the balance of dividends accrued in respect of the “B” ordinary shares during the fiveyear suspension
period, will be taken into account in the formula referred to in paragraph 188.8.131.52 above; and
3.8.3 apart from the suspension of dividend rights, the “B” ordinary shares will have exactly the same rights (including voting rights) as, and in all respects rank pari passu with, the 740 OPCO ordinary shares held by ArcelorMittal South Africa.
3.9 Governance of Future Relationship between ArcelorMittal South Africa, BEE SPV and ESOP Newco
3.9.1 From the Effective Date, the Subscription and Shareholders` Agreement shall govern the relationship between ArcelorMittal South Africa, BEE SPV and ESOP Newco as co-shareholders in OPCO.
3.9.2 The Subscription and Shareholders` Agreement, inter alia, provides for -
184.108.40.206 ArcelorMittal South Africa and OPCO to have a common board of directors and BEE SPV being entitled to appoint 1 OPCO board member which must be a Black Person (as defined in the Codes);
220.127.116.11 a BEE lock-in binding BEE SPV, until the permitted exits described in paragraph 3.6 above and an obligation on BEE SPV to procure that the constitutional documents of its direct and indirect shareholders, contain appropriate lockin provisions which mirror those binding BEE SPV;
18.104.22.168 a forced sale to ArcelorMittal South Africa at fair value of the “A” ordinary shares upon the insolvency of BEE SPV; and
22.214.171.124 the terms of the Put Option and “A” and “B” Repurchase Rights.
3.10 Conditions Precedent
The Subscription and Shareholders` Agreement and the Transaction are subject to the fulfilment, by no later than Monday, 28 February 2011, of the following conditions precedent -
3.10.1 approval of the Transaction by the respective boards of directors of ArcelorMittal South Africa, BEE SPV and ESOP Newco and by Shareholders;
3.10.2 the circular and any other documentation to be sent to Shareholders pursuant to the JSE Limited Listings Requirements (”Listings Requirements”), having been approved by the JSE Limited (”JSE”) and OPCO`s articles of association having been amended to the extent necessary to comply with the requirements of Schedule 10 of the Listings Requirements;
3.10.3 to the extent required, obtaining approval of and/or necessary rulings in relation to the Transaction from all applicable regulatory authorities, including the JSE and the Securities Regulation Panel;
3.10.4 ArcelorMittal South Africa notifying BEE SPV in writing, that ArcelorMittal South Africa is satisfied with the identity of the shareholders introduced into BEE SPV, the direct and indirect ownership structure which had been established in respect of BEE SPV and that such ownership structure achieves the Minimum Required BBBEE Shareholding Composition prescribed by ArcelorMittal South Africa;
3.10.5 OPCO in general meeting having adopted special resolutions to create the “A” and “B” ordinary shares and such resolutions having been registered with the Registrar of Companies; and
3.10.6 the transfer by ArcelorMittal South Africa to OPCO of the ArcelorMittal South Africa operating assets having been completed and a shareholders` agreement in relation to BEE SPV being entered into between the shareholders of BEE SPV and ArcelorMittal South Africa.
4 SALIENT DATES AND TIMES
Circular and notice of general Monday, 6 September 2010 meeting posted to Shareholders on or about
Last day for receipt of forms of Friday, 24 September 2010
proxy for the general meeting by
09h00 on or about
General meeting to be held at 09h00 Tuesday, 28 September 2010
at the address stipulated in paragraph 5 below on or about
Results of the general meeting Tuesday, 28 September 2010 released on SENS on or about
Results of the general meeting Wednesday, 29 September 2010 published in the South African press
on or about
All times shown in this announcement are South African times. These salient dates and times are subject to amendment. Any such relevant amendments will be released on SENS and published in the South African press.
5 GENERAL MEETING
A general meeting of Shareholders (”General Meeting”) will be held at 09h00 on or about Tuesday, 28 September 2010, at Kwena Suite, Hilton Sandton, 138 Rivonia
Road, Sandton, South Africa, to consider and, if deemed fit, pass, with or without modification, the necessary resolutions to implement the Transaction.
6 FURTHER DOCUMENTATION
A circular setting out the full terms of the Transaction and convening the General Meeting will be posted to Shareholders on or about Monday, 6 September 2010.
7 FURTHER CAUTIONARY ANNOUNCEMENT
The pro-forma financial effects of the Transaction were not yet available at the time of the publication of this announcement. Such detail will be announced by no later than Monday, 30 August 2010. Accordingly, Shareholders are advised to continue exercising caution when dealing in ArcelorMittal South Africa securities, until a further announcement is made in this regard.
Tuesday, 10 August 2010
For further information please contact:
Hennie Vermeulen Manager: Investor Relations
Tel: (016) 889 2352
Goldman Sachs International
Goldman Sachs International, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for ArcelorMittal South Africa and no one else in connection with the Transaction and will not be responsible to anyone other than ArcelorMittal South Africa for providing the protections afforded to clients of Goldman Sachs International nor for providing advice in connection with the Transaction or any other matters referred to in this announcement.
Deutsche Securities (SA) (Proprietary) Limited
Date: 10/08/2010 08:59:46 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.
Ownership is the most contentious issues of the B-BBEE elements. Many people condemn B-BBEE as a result of the misinformation surrounding ownership, yet ownership can be one of the best elements to not only earn points, but make profits.
The concern that may people have with ownership is it tends to make one, or a small group of people wealthy, and ignores the broad section of the economy. This is not unusual in itself. Traditionally, throughout the world, only a small percentage of people are businessmen doing big deals all day long. Think of Donald Trump, Richard Branson, Johan Rupert, Patrice Matsepe. We cannot name a lot of people, because there are not that many billionaires!
However business is about buying and selling – products, services and also shares in your business. Bill Gates owns less than 10% of the shares in Microsoft. He had to sell shares in order to grow the business. So too have many successful businessmen – Brian Joffe, founder of Bidvest does not personally own the majority of shares in his business. Only a few JSE listed companies are more than 50% owned by their original founder, or even the family.
So, it makes sense to sell shares in the business – to raise capital, to open new markets, to gain experience from other owners who may also become board members. Many businesses have sold shares to their employees, or given them shares in lieu of bonuses, or in the form of a “golden handcuffs”. In all cases, the intention would be to engender more loyalty, productivity, or to attract more talent.
There MUST be a reason for selling shares.
The sale of shares should be analyzed from a B-BBEE viewpoint – look at how many points the sale will earn you. Ensure that the points are maximized as the sale is done, rather than wait for an analysis afterwards when it is to late.
The codes can get quite complicated over ownership issues – not just the inclusion of black women, but also ownership schemes, and other participants.
The structures used in implementing the sale can also earn or lose you points. Trusts are a popular instrument in which to house shares, but there are some very specific rules to follow to ensure that all the points are earned. The same applies to employee ownership schemes and broad based schemes. Some companies issue options and warrants and they too should be taken into account. Certain shareholding can be excluded from the calculation, benefiting the scorecard: This includes mandated investments and ownership by organs of state.
To help our clients navigate through this difficult set of codes, we are organizing a breakfast seminar next month.