PPC adds R2bn to upliftment agenda
The top-up will complement residual empowerment shareholdings from two previous transactions
PPC has made a R2.1bn top-up to its broad-based black economic empowerment programme, providing such stakeholders with an effective 30% at holding company level.
The PPC Phakama transaction is valued on a derived intrinsic equity value of R10.2bn for PPC’s South African assets before adjustments for a noncontrolling and unlisted interest. The valuation was done by an independent valuator. The share fell 6.46% near the close.
"The appropriate [empowerment] credentials are important to PPC as it falls under the Mineral and Petroleum Resources Development Act," Electus Fund Managers analyst Mish-al Emeran said. The cement producer’s quarries need mining licences and prospecting rights.
PPC had been noncompliant in this respect from September 2016 following a R4bn rights issue and this constituted a risk for the business, he said. The empowerment "cost to existing shareholders is not always immediately quantifiable but it will clearly lead to dilution".
PPC believed the dilution would be about 4%.
The top-up will complement residual empowerment shareholdings from two previous transactions implemented at the listed company level.
It will be broad-based, encompassing the PPC SA employee trust, a community development trust and "eligible black entrepreneurs".
The transaction "demonstrates our approach to long-term sustainable value creation", PPC CEO Johan Claassen said.
Employees will directly hold about 10% of the group’s South African businesses, allocated equally. Communities living near areas in which PPC operates will indirectly hold about 8% of PPC’s operations in SA. Eligible black entrepreneurs will be allocated about 7% in direct equity holdings in PPC’s South African businesses.
The transaction will be through a notional vendor funding structure over 10 years. During this period, participants — with the exception of communities — will receive a "trickle dividend" of 20% if dividends are declared.
This will be used to purchase PPC shares at the prevailing market price in the name of individuals. Communities will receive a 20% "trickle dividend" in cash to be used for community development initiatives.