Telecommunications group MTN has announced a new black economic empowerment scheme worth R9.9 billion.
News of the planned scheme, to be called MTN Zakhele Futhi, comes ahead of the November unwinding of the group’s existing empowerment vehicle, MTN Zakhele, created in 2010, due to the maturing of its third-party funding.
Zakhele Futhi will hold about 4% of MTN’s equity. The new scheme, together with the continuing contribution of the original Zakhele transaction, means an “effective indirect ‘see-through’ black ownership in excess of 30% of MTN’s South African operations”, the group said in a statement to shareholders.
Thirty percent black ownership of MTN South Africa is important given that telecommunications operators must have at least 30% of their equity in the hands of historically disadvantaged individuals or groupings to be eligible to get access to new 4G/LTE spectrum.
The 30% requirement is also mandated in industry empowerment charters, MTN said.
Zakhele Futhi will broaden MTN South Africa’s effective BEE ownership through a public offer to black individuals and groups, it said. It is also an opportunity for MTN Zakhele shareholders to reinvest through Zakhele Futhi as part of the structured unwinding of the Zakhele scheme, it added.
MTN has promised to provide an effective transaction discount of 20%, through additional equity in the Zakhele Futhi structure. The new transaction will be leveraged through vendor and third-party funding.
The MTN share price at which the new transaction will be implemented is R102.80. (MTN closed on Friday at R125.42 and was trading at R124 at 9:08am in Johannesburg.)
In addition to the new transaction, MTN has proposed to establish a new employee share ownership plan for eligible MTN employees. In this regard, it intends issuing about 0.1% of its current fully diluted issued ordinary share capital to be held in a trust for the benefit of eligible employees (pending vesting). Management and directors of MTN will not participate in the scheme.
Existing Zakhele investors have been given three options ahead of the November unwinding of the scheme: take a cash pay-out, receive shares in MTN or reinvest the money in Zakhele Futhi.
The eight-year scheme proposes locking in initial shareholders for a period of three years, after which they may trade among other members of the black public.
MTN said it expects to publish a prospectus for the new empowerment scheme on September 12.
Only black people and black groups are eligible to participate in the MTN Zakhele Futhi offer. Those who are found to have misrepresented their BEE status may be forced to sell their shares at a potentially significantly discounted price, MTN warned.
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