RCL Foods, majority owned by Remgro, has mentioned it’ll ‘unwind’ its 2014 black financial empowerment (BEE) transaction at a complete value to shareholders of R230 million.
In impact, it must bail out its BEE shareholders, as a result of for the reason that implementation of the transaction its “share price has significantly declined in value, resulting in the … transaction being materially underwater at the end of its term in May”.
It will purchase again shares from its worker share belief (the ESOP Trust), two particular goal autos – SPV 1 and SPV 2 – and “the Strategic Partners” via a focused buyback of practically 20 million frequent shares from the belief and SPV 2 at R11.49 per share in addition to 43 million nominal shares at 1c every.
The transaction round is now not out there on the RCL Foods web site (its doc library solely extends to 2015).
Read:
The BEE transaction was concluded in May 2014 after delays on the Companies and Intellectual Property Commission (CIPC).
At that point, shares had been buying and selling at across the R17 stage. In May this 12 months, RCL shares had been simply above R10. On Friday, its thinly-traded shares closed at R11.
The shareholders of SPV 2 are the Imbewu Consortium (69.76%), Ikamva Labantu Empowerment Trust (29.07%) and businesswoman Manana Nhlanhla (1.17%).
The group mentioned on the time that the financial value of implementing the transaction in 2014 was quantified as roughly R276 million.
This comprised R193 million regarding the workers belief and SPV 1 which was amortised over the total time period of the transaction, R83 million regarding SPV 2 which was expensed instantly, and an accelerated cost of R17 million incurred on the unwinding of the earlier (2008) BEE construction.
At the time, RCL Foods mentioned the previous “BEE structure is considered unlikely to deliver any equity value to the BEE parties and as such, RCL Foods and the BEE parties have agreed to unwind” it and “implement a new BEE ownership transaction in order for RCL Foods to sustain its BEE ownership and to create value for the BEE parties”.
Current transaction
RCL Foods asserts that the present (2014) “BEE Transaction was not recognised for accounting purposes and the financial effects on the earnings, headline earnings, net asset value and/or net tangible asset value of shares will be limited to the transaction expenses and are considered to be negligible”.
It provides: “The financial position of RCL Foods is not expected to change as a result of the repurchase and, as such, no pro forma financial information is provided.”
But, in impact, RCL Foods can have ended up paying for the BEE deal twice (thrice in the event you depend the failed unique transaction).
The ‘unwind’ will probably be put to shareholder vote and can have to be authorized by the requisite majority.
The 2014 BEE deal, introduced the earlier 12 months, was carried out similtaneously the acquisition of TSB Sugar, the implementation of the BEE transaction of that agency in addition to an fairness capital elevate of R2.5 billion.
Read: RCL’s sugar unit studies report earnings
Matthews Phosa (and his MTM Family Trust) was recognized by TSB as an acceptable “strategic partner” within the BEE deal, which was below negotiation previous to the acquisition by RCL. It was then tweaked to make sure that the empowerment companions would grow to be a shareholder on the listed firm stage, in a transaction valued at R120 million. RCL Foods estimated the financial value of the transaction at R25 million.
Remgro
Remgro owns 74.9% of RCL Foods and there was hypothesis out there for a while that it’ll delist the enterprise within the close to time period.
Read: Is Remgro planning its exit from the JSE?
Its market capitalisation is R10.5 billion, with the portion not owned by Remgro accounting for round R2.6 billion. Any supply would have to be made at a premium.
This potential transaction probably hinges on the unbundling and separate itemizing of the hen enterprise, Rainbow, in addition to the possible commerce sale of its logistics unit Vector.
Read: ‘No cheap chicken on the shelf’ – hen producer
