broad-based black economic empowerment transaction
DESCRIPTION
Broad-based Black Economic Empowerment Transaction. Presentation to Investors, Analysts and Media 28 August 2008. Introducing the Team. Ntombi Langa-Royds -MC, Non-Executive Director John Gomersall -PPC, CEO Community Service Groups Phutumile Dumisa - Shalamuka for Penreach - PowerPoint PPT PresentationTRANSCRIPT
broad-based and sustainable
Pretoria Portland Cement Company Limited
Broad-based Black EconomicEmpowerment TransactionPresentation to Investors, Analysts and Media
28 August 2008
2
Ntombi Langa-Royds - MC, Non-Executive Director
John Gomersall - PPC, CEO
Community Service Groups Phutumile Dumisa - Shalamuka for Penreach
Mike du Toit - Disability Empowerment Concerns, CEO
Strategic Black Partners Salukazi Dakile-Hlongwane - Nozala, Executive Chairman
Peter Malungani - PEU, Executive Chairman
Mandla Gantsho - iLima Portland Consortium, CEO
Jerry Vilakazi - Capital Edge Cement Consortium, Chairman
Introducing the Team
broad-based and sustainable
33
John GomersallPPC – Chief Executive Officer
4
R2.7bn broad-based black ownership initiative 15.00% shareholding in the increased issued share capital of PPC acquired by
black people Major portion allocated to broad-based empowerment groupings through the
inclusion of PPC employees and their families, communities, construction and related industry associations, education and community service groups
This initiative will directly benefit approximately 3.5m people in South Africa, of which 99.90% are black individuals
Total risk equity capital of approximately R65.4m contributed by empowerment parties
An issue of new shares of 8.50% of PPC’s increased share capital and a Scheme of Arrangement in terms of Section 311 for 6.65% of PPC’s increased share capital
PPC will raise approximately R1.5bn long-term debt to replace existing short-term interest-bearing debt raised to fund its capital expansion projects and working capital requirements
Highlights
5
PPC’s approach to Transformation
EmploymentEquity/Job Creation
Black Equity Participation
Develop Black Entrepreneurs
Opportunities for black leaders and employees
Empower and uplift disadvantaged communities
The Poverty Barrier
The Skills Barrier
The Business Barrier
The Opportunity Barrier
Equitable Economic Opportunities
CSI
Skills Development
Preferential Procurement
Enterprise Development
Ownership and Management
6
The transaction is structured to embrace the true spirit of broad-based black economic empowerment (BBBEE)
Developed in accordance with Mining Charter and the DTI’s Codes of Good Practice A holistic part of our transformation strategy which is part of PPC’s DNA A significant stride towards meeting our BBBEE objectives and conversion of mineral
rights
This empowerment transaction achieves: Meaningful and sustainable wealth creation and black empowerment Minimal dilution and cost to shareholders while strengthening our BEE credentials Long-term mutual value creation for all stakeholders
BBBEE Transaction overview
7
Transaction Structure OverviewBroad-based stakeholders
Total transaction 15.15% - R2.7bn
Broad-based Entities 8.15%
Strategic BlackPartners7.00%
(Including some Broad-based elements)
8
Majority of 8.15% to Broad-based Entities 5.2% External stakeholders 2.95% Internal stakeholders
7% to Strategic Black Partners 4 partners in total some including Broad-based elements such as
youth and women
Transaction Structure OverviewBroad-based stakeholders
9
Truly broad-basedExternal Trusts and Community Service Groups (CSGs)
Largest allocation to Construction Industry Association Trust Community Trust and CSGs (Shalamuka & DEC)
Internal Trusts Including staff, management and their families Small allocation to a trust for 3 Independent Non-Executive Directors
R1.46bn allocated to Broad-based stakeholders
10
R1.46bn allocated to Broad-based stakeholders
Independent Black Non-Executive Directors
0.05%
PPC Team Benefit Trust0.50%
PPC Current and Future Team Trust
0.57%
PPC Black Managers Trust1.83%
Internal Components (2.95%)
CommunityService Groups
1.50%
PPC Education Trust1.00%
PPC Community Trust0.70%
PPC Construction Industry Association Trust
2.00%
External Components (5.20%)
11
Detailed structure – slide 39 - in Annexures at back of booklet Reflects effective % shareholdings
Source of shares 6.65% into various Trusts via Section 311 Scheme of Arrangement 8.5% via the issue of new shares
Transaction Structure and Overview
12
Share price applicable R31.32 (30 day VWAP at 21 August 2008) Funding
Construction Association and PPC Education, Community, Team Benefit and the Black Managers Trusts - financed through a preference share funding structure
General staff and the black non-executive directors will receive a non-refundable contribution from PPC to purchase shares
New PPC shares to be issued to CSG - funded by a credit sale structure - (CSGs contribute nominal R5.4m in equity)
New PPC shares to be issued to SBP consortium - funded by a credit sale structure (SBP’s contribute R60m in equity)
Vesting and Lock-in Shareholdings have various vesting conditions and sale restriction periods
Dividends General Staff and black non-executive directors will receive dividends immediately Trickle dividend to external trusts, PPC Team Benefit Trust and CSG’s
Transaction Structure and Overview
13
Dividends / Earnings dilutionary effect Initial dilution only 5.9% – (new shares issued - 8.5% of increased shares in issue
reduced by 2.6% shares bought back held by PPC Treasury) It is PPC’s intention to buy back shares when appropriate to limit dilution
Balance Sheet PPC will receive approx. R1.5 bn through the CSG PPC and SBP PPC interest
bearing loans PPC intends using these long-term interest bearing loans to replace existing short-
term interest bearing borrowings raised to fund capital expansion projects and working capital requirements
IFRS2 share-based payment charge R557.4m equates to 3.24% of market capitalisation of R17.2bn at close of business
on 21 August 2008
Transaction Structure and Overview
broad-based and sustainable
1414
Phutumile Dumisa
15
The Shalamuka Foundation is a trust founded in 2006 to act solely as the funding vehicle for the highly regarded Penreach Whole School Development Programme (“Penreach”)
Penreach has enjoyed 14 successful years of operation, reaching and imparting skills to over 900 schools and 2200 teachers annually, 4,000+ teachers / 3 million learners reached to date. 90% of the teachers are women and 95% are black rural South Africans. Beneficiaries are identifiable by their registration with the programme
Shalamuka is focused on securing long-term sustainability and funding for Penreach The 350,000+ annual learners are mainly in Mpumalanga (rural/ disadvantaged township
schools) and Limpopo (Bushbuckridge and Mkhuhlu areas) also in Swaziland Trustees 85% black South Africans and 71% are black women. All trustees are volunteers
and do not benefit financially, including; Yvonne Chaka Chaka Mhinga; Leah Gcabashe; Phineas Mojapelo; Paul Harris; Elizabeth Maepa and Ethyl Nyembe
Shalamuka has EmpowerDex certification and is compliant with 2007 DTI BEE codes. It enhances CSI/BEE scorecard of investee companies
The Shalamuka Foundation0.75% - R134m
16
Founded in 1994 with 40 teachers from 10 schools, Penreach is a non-profit skills development programme supporting qualified and unqualified teachers by providing skills training workshops, support visits to schools by experienced fieldworkers, and tutorial lessons in mathematics and science.
The results are seen in improved teacher status and confidence, productivity and discipline, focused results in maths, science and literacy
The Penreach mission statement is: “To improve the quality and accessibility of education for teachers and learners in disadvantaged schools”
Penreach’s upliftment of local communities via improvement in education has been recognised by numerous awards and is supported by the Department of Education
Penreach principles are currently being applied by, Grace College (KZN), Mitchell House Preparatory School (Polokwane), Thandulwazi Teacher Training Programme (Maths and Science), St. Stithians College (Johannesburg)
The PPC transaction will enable Shalamuka to roll out their programme in a number of other regions and provinces, and schools outreach programmes, based on the Penreach model
Shalamuka –The Penreach Programme
broad-based and sustainable
1717
Mike du Toit
18
DEC – The Disability Empowerment Concerns Trust was established in 1996 by seven major South African NGO’s representing 2 million South Africans with disabilities, of whom at least 85% are black people.
DEC investment returns contribute to funding the human rights and development work of:
SA Federation for Mental Health Deaf Federation of South Africa Disabled People South Africa National Council for Persons with Physical Disabilities in SA South African National Council for the Blind Epilepsy South Africa Thabo Mbeki Development Trust for Disabled People
DEC was established to engage in business ventures as a Broad-based Black Economic Empowerment shareholder.
Disability Empowerment Concerns Trust0.75% - R134m
19
DEC is governed by a Board of Trustees made up of 14 independent trustees - 9 are black people (64%); 4 are black women (28%).
5 of 8 directors of the DEC Investment Holding Company are black people, 4 are black women, and all are people with disabilities.
Mandate to develop a sizeable diversified portfolio of investments which will over time yield a sustainable income stream without the need for sale.
DEC therefore has a long-term time horizon in evaluating investments DEC seeks that an investment is self funding, but if necessary
supplements funding requirements from its own sources. DEC’s unique value proposition has led to our inclusion in the BEE
transactions of many major South African companies
Disability Empowerment Concerns Trust
20
Strategic Black Partners7% in total – R1.25bn
Also including broad-based elements
Peu, 1.90%
Nozala 1.80%
iLima Portland Consortium
1.80%
Capital Edge Consortium
1.50%
broad-based and sustainable
2121
Salukazi Dakile-Hlongwane
22
Broad-based women's empowerment group. Established 1996 with 100% black management, 86% Black Shareholding; 34% Broad-based shareholding; 70% Black women owned and indirectly benefitting over 500,000 black women
Mission involves economic advancement of women through constructive business partnerships. Develops and supports rural women entrepreneurs through Nozala Trust
Long-term investor focused on the resources sector, industrial and consumer services. PPC completed its first BEE transaction with Nozala, (50% stake in Afripack) which was
100% vendor financed by PPC as an enterprise development project in 2004 In addition to broader business associations and relationships in SA, the rest of Africa and
globally, Nozala is also able to contribute following: Sourcing contracts for PPC Support management in recruitment efforts for suitably qualified black executives Support effective implementation of PPC’s enterprise development programme Assist in identifying meaningful and sustainable community projects
Nozala1.8% – R322m
broad-based and sustainable
2323
Peter Malungani
24
Peu is a black owned and black managed company, established in 1996 with a management shareholding of 72%, the balance (28%) is held by two trusts
Intsika Investment Trust and Intsika Enablement Trust which facilitate BBBEE Peter Malungani is the founder and Executive Chairman of Peu. The management team
comprises of 7 individuals, with a combination of skills in finance and investment banking Prior to the formation of Peu, Peter was owner of a construction business which has built
a long-standing relationship with PPC since 1993 when in partnership we built the first corporate owned shopping centre in Soweto in 1993
Peu holds strategic long term investments predominantly in infrastructure and various sectors
Peu’s sector portfolio includes amongst others DipCivils and Stabilid Peu previously held 50% of Taylor Woodrow SA, which built the Hector Peterson
Memorial complex in Soweto and together with Grinaker, built the Monte Casino complex
Peu will add value by assisting PPC with advice on external trusts and enterprise development
Peu1.9% – R340m
broad-based and sustainable
2525
Mandla Gantsho
26
Established to participate in the PPC transaction and expose shareholders to a prime infrastructure development and construction materials investment
Key shareholders are: Controlling shareholders of iLima Group (Pty) Ltd, i.e.
• Dr Mandla Gantsho, a development finance practitioner, currently working for the African Development Bank (formerly CEO of the DBSA)
• Dr Lupepe the Group Chief Executive of iLima Group an entrepreneur and founder • Simisani Kupe the CEO of ILima Mining and Strategic Investments
iLima Group employees Other non-iLima Group Black individuals, youth and women
iLima Group is a long-term investor focused on infrastructure development, minerals exploration and energy generation and distribution
Other significant iLima Group investments are in Group Five Limited, Bombela Concession and Imbumba Aganang Concession (Department of Foreign Affairs Headquarters)
iLima Portland Consortium and PPC will both derive synergies from their strategic alignment along a more integrated infrastructure-related demand and materials-related supply chain linkages
The iLima Portland Consortium 1.8% – R322m
broad-based and sustainable
2727
Jerry Vilakazi
28
Capital Edge Cement Consortium is a Broad-based group formed in August 2006 primarily for the purpose of the Strategic Black Partnership with PPC.
Our vision is to be a strategic partner by playing a leading role in BBBEE through participation in initiatives that have the potential to create employment and skills transfer
Diverse - strong women component, youth and shareholder representation in all provinces
Consortium is led by Jerry Vilakazi, (CEO of BUSA and entrepreneur) with key management in Dr. Rejoice Simelane, Chama Kamukwamba and Tiisetso Tsukudu
Shareholders Capital Edge Cement Consortium consist of the following: Capital Edge Resources (Jerry Vilakazi, )
Ubuntu-Botho Investment Holdings (Broad-based groups/individuals) Black Management Forum Investment Co. (Broad-based professionals) Imbewu Mineral Holdings (Tiisetso Tsukudu) Baswa Investments (Youth Groupings) (Malose Kekana) Yard Capital (Leslie Maasdorp) Abafazi iAfrika Group (Fay Mukaddam)
Together with the Black Management Forum (BMF) we are committed to Human Capital development and will further assist PPC in achieving its transformation through access to black skills and talent and proactively identifying new business opportunities in sub-Saharan Africa
Capital Edge Cement Consortium1.5% – R268m
broad-based and sustainable
2929
John GomersallPPC – Chief Executive Officer
30
Direct Beneficiary Analysis –Excluding Broad-based elements in Strategic Black Partners
External Trusts 1.1m
CSG’s2.4m
Internal Trusts4 000
Based on Stats SA dependency multiplier of 3 –Could touch over 12 million people?
3.5 million direct beneficiaries
31
Broad-based BEE and diverse partnership structure Positively impacts 3.5 million people directly Major stride advancing BBBEE in PPC. Future advances to come Transformation in PPC goes beyond just equity ownership Meets the requirements of the Mining Charter and DTI Codes Mutual long-term benefits for key stakeholders – shareholders, employees,
communities, SBPs, CSGs Sustainable – lowest possible borrowing cost to participants IFRS2 charge at 3.24% of market capitalisation in line with recent BEE
transactions Dilution is minimal
Summary and Conclusion
32
Thank you – Any Questions?
33
33
broad-based and sustainable
Ntombi Langa-RoydsPPC – Non Executive Director
34
Key dates
Circular and notice of general meeting posted to shareholders Thursday, 16 October
General & Scheme meeting of shareholders Tuesday, 11 November
Court hearing to sanction the Scheme Tuesday, 25 November
Effective closing date of transaction on or about Monday, 15 December
35
Media are invited to a round table session at the front of the auditorium at 11:30 this morning
PPC executives are available for further explanations
Break for refreshments/finger lunch in the atrium
Thank you once again for attending
Closing Proceedings
37
broad-based and sustainable
ANNEXURES
38
Strategic Black Partners CEO BEE Credentials Value – Add
NOZALA(1.8%)R322m
Salukazi Dakile-Hlongwane Black women’s empowerment group est.1996 focused on mining services and construction sectors
Will assist PPC with new business, identification of black executive talent, implementation of community/ enterprise development projects
Peu(1.9%)R340m
Peter Malungani Black owned and managed investment company focused on operations in construction
Will assist PPC with implementation of external trusts and enterprise development projects
iLIMA PORTLAND CONSORTIUM(1.8%)R322m
Mandla Gantsho Extensive interest in construction, power generation and PPP’s
Will assist PPC with International and African continental infrastructural networking and material supply chain linkages
CAPITAL EDGECEMENT CONSORTIUM(1.5%)R268m
Jerry Vilakazi Formed for PPC BEE transaction, includes women, youth and disabled component. It is a Broad-based consortium
Will assist PPC with transformation, new business opportunities in Africa and identification of black executive and management talent
Summary Table SBP’s BEE Credentials
39
Transaction Structure (based on 30 day VWAP to
close of business on 21 August 2008 of R31.32 per PPC share)
0.70%
The PPC Team Benefit Trust
The PPC Community Trust
15.15%
0.50%
The PPC Construction Industry Associations
Trust
2.00%
The PPC Team Benefit Trust Funding SPV
The PPC Black Managers Trust
1.83%
The PPC Black Independent Non-Executive Directors Trust
The PPC Construction Industry Associations Trust Funding SPV
The PPC Community Trust
Funding SPV
100%100% 100%
The PPC Education Trust
The PPC Education Trust Funding SPV
1.00%
100%
Other PPC Shareholders
1.50%
0.75%
7.00%
Peu
The SBP Funding SPV
Nozala Capital EdgeiLima
1.90% 1.80% 1.50%1.80% 0.05%
0.57%
The CSG Funding SPVBroa
d-ba
sed
Stra
tegi
c
The Current PPC Team Trust and The Future PPC Team Trust DEC
0.75%
Shalamuka
External trusts Internal trusts
Internal trust
CSGs
SBPs
Percentage holdings all reflect effective holding in PPC post increase in shares issued – reduced by shares held by PPC in treasury
40
Trusts Effective % of PPC Shares (millions) Value (R million)
External Components
The PPC Construction Industry Associations Trust 2.00% 11.425 R357.8
The Community Service Groups (Shalamuka & DEC) 1.50% 8.569 R268.4
The PPC Community Trust 0.70% 4.016 R125.8
The PPC Education Trust 1.00% 5.713 R178.9
Internal Trusts
The PPC Black Managers Trust 1.83% 10.470 R327.9
The PPC Team Benefit Trust 0.50% 2.856 R89.5
The Current & Future PPC Team Trust 0.57% 3.225 R101.0
Black Independent Non-Executive Directors 0.05% 0.287 R9.0
TOTALS 8.15% 46.562 R1 458.3
Overview of Broad-based components