Barloworld offers a stake in property portfolio to black public
Investors have until May 31 to apply for shares
JSE-listed industrial conglomerate Barloworld looks set to boost its empowerment credentials significantly thanks to a R3.5bn BEE scheme.
The distributor of Caterpillar’s construction machinery will increase its black ownership to 48% from 32% after the sale of its R2.86bn property portfolio to a new black-owned company Khula Sizwe Property Holdings.
Black investors and about 14,000 of Barloworld’s management and employees will own shares in Khula Sizwe, which was established for the empowerment scheme.
Through the public offer, black individuals and black entities have until May 31 to apply for 16.34-million Khula Sizwe shares, at R10 per share.
The public offer, which opened on Wednesday and will give the black investors a 30% interest in Khula Sizwe, is meant to raise R163.4m.
With i R174.3m from the employees trust and R207m raised from the management trust, the money raised through the public offer will partly fund the acquisitions of the property portfolio, which comprises motor retail, industrial and residential properties.
But the bulk of the funding — R2.2bn — is a loan from Nedbank, Barloworld said.
Tantaswa Fubu, Barloworld’s group executive for human capital, said the scheme will boost Barloworld’s empowerment credentials.
“We do work for the government and mining companies that prefer to deal with empowered companies,” Fubu said.
She said Barloworld decided against selling the stake to established BEE companies.
“We wanted this to be broad-based. Why would we want to sell to significant BEE partners when we have employees who are already creating value?” Fubu said.
At R2.7bn, Barloworld has sold the properties at a discount of 5%, given their value of R2.86bn, she said.
As part of the transaction, Barloworld SA and Barloworld Logistics will enter into a 10-year lease agreement with Khula Sizwe. According to a prospectus on the scheme, Barloworld and Khula Sizwe might extend the lease for five more years.
Fubu said the lease rentals, which guarantee a stream of cash flows to Khula Sizwe, will increase by 8% per annum during the term of the lease agreement.
“Khula Sizwe’s prospects are linked to the continued existence of Barloworld…. There is greater certainty of cash flows in a property transaction due to the [leases] and Barloworld’s guarantee of the lease payments. The certainty of cash flows lowers the risk of default on the debt obligation and therefore increases the potential for value creation for Khula Sizwe shareholders,” the prospectus reads.
Barloworld has secondary listings on the London and the Namibian stock exchanges.
The minimum number of Khula Sizwe shares to be applied for is 250, which will cost R2,500, the prospectus reads. There will be a lock-in period of five years. The empowerment period for Khula Sizwe is 15 years.
The prospectus reads that restricted trading will be allowed from the sixth year. After the five-year lock-in period, the Khula Sizwe shares may be listed to facilitate trading between black investors.
Listing on the JSE’s empowerment segment will boost the shares’ liquidity and tradability, Fubu said.
Barloworld shares were up 1.25% to R136.92 on Wednesday.