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DealMakers - 2019 Annual

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BEE Deal of the Year

Disposal of Nampak Glass to Isanti Glass 1 (Kwande Capital and SABSA)

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Nampak, Africa’s largest diversified packaging manufacturer, sold its glass business to Isanti Glass 1, an entity 60% owned by black investment company, Kwande Capital, and SABSA – the local subsidiary of beer-maker AB InBev and holding company of South African Breweries – with the remaining 40%. Kwande was established in 2010, with a primary focus on investing in companies with high growth potential in strategic sectors, primarily in the manufacturing, and oil and gas sectors. The deal, settled in cash, was valued at R1,5bn.

Nampak Glass is one of only two primary glass container manufacturers to service the glass container industry in South Africa, operating 49 facilities worldwide. It serves a broad market of local and multinational customers in the beverage and food industries, operating three furnaces at its manufacturing facility in Roodekop, Gauteng. The furnaces supply nine forming lines at the site, on which it operates its own cullet sorting and processing plant. The company has an estimated 25% market share.

The transaction has the potential to facilitate key skills transfer from AB InBev to Isanti, improving the operational performance within the business, and creating shareholder value. In addition, Isanti, as the first and only black-owned and controlled glass container manufacturer in South Africa, will facilitate procurement of glass containers from a BEE-controlled entity, achieving a significant milestone for a competitive industry.  

For Nampak, the decision to sell the glass division is a sensible one, and a priority to improve financial performance; the company has long said it lacked the technical know-how to run the operation efficiently, since it bought out its German joint venture partner in early 2012 for R1bn. The deal, which took more than 18 months to conclude, is still subject to the fulfilment of conditions precedent including, among others, approval by the South African competition authorities. 

Local Advisers

Financial Advisers: Nedbank CIB, Standard Bank
Sponsors: Nedbank CIB, UBS
Legal Advisers: ENSafrica, Bowmans, Tugendhaft Wapnick Banchetti
Transactional Support Services: EY

Comment from the Independent Panel:  

The partnership between Kwande & SABSA, to effect the purchase and, in turn, a successful BEE deal, is the most notable aspect of the deal. The close relationship, fostered through the co-shareholding, should create a mutually beneficial future business.

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BEE Pick of the best in alphabetical order

Barloworld’s Khula Sizwe Property deal

The Barloworld Khula Sizwe BEE transaction gives effect to the genesis of a large black-owned and managed listed property company. The deal, which was a two-component transaction, involves the sale of properties from Barloworld to newly-created entity Khula Sizwe, valued at R2,9bn, as well as the free issue of Barloworld shares (3% valued at R750m) to the Barloworld Empowerment Foundation.

The Foundation’s focus is poverty alleviation, education, youth development and advocacy, targeted at the marginalised and underserviced citizens currently largely excluded from the economy. 

The property portfolio, comprising some 60 properties across several provinces, was sold at a 5% discount with a 10-year lease agreement – with Barloworld as lessee – which will generate rental income to service its debts and finance its operations, instead of relying solely on dividend pay-outs or share price appreciation. The transaction entailed the disposal and re-organisation of an extensive portfolio of core commercial and industrial properties. 70% of the newly-created company was issued to Barloworld staff (32%) and management (38%). 30% of the new company was set aside for Black Public participation. A minimum of 250 Khula Sizwe shares were offered at R10 per share; the IPO was oversubscribed. The sale of the property assets were funded through debt (R2,2bn bank loan) and equity (R544m, which includes R163,4m raised from the black public via an IPO).


The 15-year empowerment scheme was innovative, with overarching objectives of sustainability, value creation and minimal economic costs to shareholders, while at the same time creating the opportunity to generate value for more than 33,000 participants. In time, Khula Sizwe will expand its property portfolio and property management business. This will be essential if it is to repay the debt over the 10-year lease agreement.


The transaction required careful cognisance of, and structuring in accordance with, the BEE Codes of Good Practice, the approval of the competition commission and Barloworld share-holders. The transaction increases Barloworld’s B-BBEE ownership by 14%, to 48%. After the five-year lock-in period, the Khula Sizwe shares may be listed to facilitate trading between black inves-tors. Investors would be wise to hold onto the shares, beyond the lock-in period, to truly benefit from growth in the investment.

Local Advisers

Financial Advisers: Tamela, Basis Points Capital, Identity Advisory

Sponsors: Tamela, Nedbank CIB

Legal Advisers: Dentons; Poswa; Webber Wentzel

Transactional Support Services: BDO, Deloitte

Phuthuma Nathi partial switch to MultiChoice Group


In 2006, and again in 2007, Naspers structured its empowerment deal enabling the acquisition by black investors of a 20% stake in MultiChoice South Africa (MCSA) through Phuthuma Nathi (PN). Today, PN comprises approximately 90,000 individual and institutional shareholders with shares listed on the Equity Express Securities Exchange. Prior to the listing of MCSA, Naspers gifted a further 5% of the shares in MCSA to PN1 and PN2, increasing exposure to 25%.

In February 2019, MultiChoice Group (MCG) was unbundled out of Naspers and listed on the JSE with a market capitalisation of R46,52bn. In its pre-listing statement, MCG, which owns 75% of MCSA, committed to a share exchange offer in terms of which shareholders of PN1 and PN2 would be afforded the opportunity to exchange a portion of their shares for shares in MCG. In August 2019, MCG announced it would acquire up to 20% of the shareholding in PN1 and PN2 at a ratio of 0.97 MCG shares for every one PN1 and PN2 share tendered. 

At the same time, the boards of PN1 and PN2 undertook a simplification of the existing PN structure whereby PN1 would acquire the entire issued share capital of PN2 so that after the implementation of the scheme of arrangement, all PN1 and PN2 shareholders would hold their interest in MCSA through PN1.

Despite the benefits of the offer, which would give PN shareholders access to a larger, more diverse group including its operations in the rest of Africa, and greater liquidity in order to realise value, the take-up of the offer was marginal. The offer of up to 20% of PN shares valued at R1,56bn (9,000,000 PN1 shares and 4,500,000 shares in PN2) saw shareholders tender just 2,599,902 PN1 in exchange for 2,488,107 MCG shares, and 1,240,442 PN2 in exchange for 1,187,103 MCG shares. A large number of PN shareholders viewed the offer price as a substantial discount to fair value, opting to remain invested in an illiquid PN share with low-growth prospects but potentially high dividend yields, rather than swopping out a portion of their shares at a price below fair value.

Despite this lukewarm response to the offer, Phuthuma Nathi remains the most successful and generous public broad-based BEE deal in South Africa. 

Local Advisers

Financial Advisers: Rand Merchant Bank, Tamela
Sponsors: Rand Merchant Bank
Legal Advisers: Webber Wentzel
Transactional Support Services: PwC

Sale by South32 of South Africa Energy Coal to Seriti Resources-led consortium

The sale by Australian-listed miner South32 of its 91.835% stake in South Africa Energy Coal (SAEC) to Thabong Coal (a wholly-owned subsidiary of Seriti Resources) and two trusts, was run by South32 as a competitive sales process, and included more than 60 other parties who initially expressed interest in SAEC. Post-transaction, Thabong Coal will hold an 81.835% equity stake, and each of the trusts a 5% unencumbered interest for the benefit of employees and communities. The remaining 8.165% stake is held by a B-BBEE consortium led by Phembani Group.

As an established major operator in the mining industry, the acquisition of SAEC enables Seriti Resources to take advantage of and realise SAEC’s already existing domestic and transnational footprint in the supply of coal. Seriti, through its operating subsidiary Seriti Coal, currently operates three large-scale open cast and underground thermal coal mines: the New Vaal, New Denmark and Kriel mines, which it acquired from Anglo American.

SAEC consists of four operating collieries located in eMalahleni: Khutala, Klipspruit, Middelburg and Wolvekrans, and three processing plants producing c. 27 million tonnes of coal per annum for the domestic and export market. A major condition of the transaction is the restructure of a loss-making coal supply contract with Eskom, which will potentially see a larger part of the SAEC business re-dedicated to the energy utility, through the provision of cost-competitive coal. Post-acquisition, Seriti will be the second largest producer of thermal coal in South Africa at c. 50Mtpa, and the largest supplier of coal to Eskom.

South32 will receive an upfront payment of R100 million and 49% of free cash flow until March 2024, capped at R1,5bn per annum. SAEC has assumed liabilities of R11,26bn.

The transaction marks the creation of a sustainable, transformed BEE coal mining major which has its interests in supplying the nation’s energy needs, and will further the strategic transformation imperatives of all stakeholders.

The deal is subject to a number of regulatory approvals from the Competition Commission and the Department of Mineral Resources and Energy.  

Local Advisers

Financial Advisers: Morgan Stanley, Macquarie Advisory and Capital Markets South Africa, Rand Merchant Bank
Sponsors: UBS
Legal Advisers: ENSafrica, Malan Scholes


Comment from the Independent Panel:  

Barloworld has set the ball in motion for the creation of a future large BEE property fund. The donation to the Empowerment Foundation of 3% of the shares is a good feature of the deal, as is the 30% public participation. It will be interesting to see how Khula Sizwe develops over the next decade.

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Comment from the Independent Panel:  

A cleverly structured deal that should have encouraged PN holders to switch to MCG, and the 5% gift to the PN structure was laudable. Valuation issues, and possibly timing too close to the unbundling of MCG, may have caused some of the difficulties. All of that said PN has been one of the most successful BEE schemes ever and through the 5% gift the company has once again rewarded its BEE shareholders.

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Comment from the Independent Panel: Seriti is building a large portfolio of domestic coal assets; having previously acquired three key mines and key rights from Anglo. They have quickly become the key coal supplier for Eskom and will play a big part in charting a sustainable plan for the electricity supply for South Africa.

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