S. African company backs black empowerment deal

JOHANNESBURG, South Africa — The South African energy company Sasol announced earlier this month it will sell 10 percent of its issued share capital to black investors as part of a campaign to address inequities created by the country’s apartheid past.

The deal is valued at about $2.5 billion and will be implemented next year if shareholders approve it.

Under the structure, 3 percent of the shares would go to black South Africans and 4 percent would be divided between Sasol’s 27,000 mainly black employees and a company foundation that will focus on skill development in communities around the company’s main plants.

“We want as many black South Africans as feasibly possible, most of whom have never owned shares before, to become shareholders,” said Sasol chief executive Pat Davies.

The company said it would work with the National Empowerment Fund to reach black South Africans, especially those in lower income groups.

South Africa’s government, which has faced criticism that too few blacks are benefiting economically from the end of white rule in 1994, has issued guidelines to encourage companies to bring black South Africans into ownership and management and to do business with black-owned companies.

So-called black economic empowerment initiatives in the past have focused primarily on transfer of ownership and a change of color among top management.

Anglo Platinum, the world’s largest platinum producer, recently announced it had agreed to sell more than $1 billion in assets to create two companies managed and controlled by South Africans who suffered under apartheid and introduce the largest employee share ownership initiative in the South African mining sector.

Energy company Sasol, the third-largest company with a primary listing in South Africa, has previously agreed to black economic empowerment deals involving equity stakes in its operations. It last year sold a 26 percent interest in Sasol Oil to Tshwarisano LFB Investments, and it expects to complete the first phase of an empowerment deal at Sasol Mining and announce a second transaction this year.

The new initiative “is groundbreaking, not only in terms of its size, but also in terms of its overarching ambition to create a legacy of building skills and capacity in the South African economy,” Sasol Chairman Pieter Cox said in a statement.

The empowerment transaction will be funded with equity, third party funding and the assistance of Sasol. Davies said that given the large scale of the deal, a “significant portion” of the funding would come from Sasol, although the details hadn’t been finalized.

Sasol said it expects to issue 34.5 million ordinary shares and 28.2 million preferred shares. To mitigate dilution for existing shareholders, the company said it may recommence a share repurchase program that would be funded with available cash.

The new class of preference shares, which will total 4.5 percent if the issued share capital, will carry a fixed cumulative preferred dividend right for 10 years, after which they will be the same as ordinary shares and listed on the Johannesburg exchange.

(Associated Press)