Afrimat deal with Mvelephanda boosts BEE over 25,1%
JSE Main Board construction materials supplier, Afrimat Limited, today introduced a consortium (“the consortium”) led by Mvelaphanda Holdings (Pty) Limited (“Mvela”) as the group’s new BEE partner.
The deal currently gives the consortium options to purchase up to 27,8 million shares in aggregate over the next three years, taking Afrimat’s BEE shareholding beyond the 26% threshold in the Mining Charter. Existing black shareholder Mega Oils (Pty) Limited, will shortly sell their 14,4 million shares to Mvela on exercise of the options to purchase these shares.
The consortium is in advanced discussions with Afrimat’s other existing black shareholder, Kwezi Mining (Pty) Limited, to secure options to acquire the 7,9 million Afrimat shares held by them. Afrimat will also extend an option to Mvela to acquire 13,4 million new shares over three years, subject to shareholder approval.
The option extended by the company is exercisable at a price of R8.50 per share, escalating at 70% of prime over the three year option period. Afrimat CEO Andries van Heerden explains that the deal has been structured to maximum benefit for existing shareholders, as there will be no immediate dilution and limited incremental dilution over the next three years.
Black owned Mvela, the consortium leader, is the controlling shareholder in Mvelaphanda Group Limited and holds a number of significant interests in the mining, energy and real estate industries in South Africa and across Africa. The group was founded in 1998 by Tokyo Sexwale, Mikki Xayiya and Mark Willcox.
The consortium is further in ongoing discussions with certain of Afrimat’s founding shareholders regarding the acquisition of additional shares to grow its stake while preserving the non-dilution of existing stakes in the group. Van Heerden says the consortium’s investment, with interest to continue growing its stake going forward, affirms Afrimat’s strong growth prospects.
Mvela’s CEO Mark Willcox says the investment is “an exciting new venture in the sector”, adding that “the prospects for the sector are good, and particularly promising for Afrimat given its expertise and positioning. Mvela will leverage off its extensive networks and investment experience to identify new growth opportunities for Afrimat.”
Afrimat Chairman Matie von Wielligh explains that the consortium’s ability to add strategic value for the group was a key factor in selection. “Our BEE partners must be able to enhance Afrimat’s ongoing operations and growth opportunities.” In this respect he says the consortium’s assistance in converting ‘old order’ to ‘new order’ mining rights is critical. “Previous share issues to Afrimat’s black partners had fallen short of the 26% required by the Mining Charter and necessary for the issue of ‘new order’ mining licences.” On conclusion of the deal the consortium will be entitled to nominate two directors to Afrimat’s board and von Wielligh anticipates significant contribution from the new board members.
In addition the deal will facilitate Afrimat’s plans to expand into Africa. “We intend to leverage Mvela’s widespread activities as a springboard for the group to penetrate markets in which we have not previously operated and expand our operations beyond South Africa,” says van Heerden.
Importantly, the consortium is locked in for a three year period with restrictions on re-sale to non-BEE entities. This will ensure that Afrimat’s BEE threshold is maintained over the long-term. The transaction remains subject to JSE and shareholder approval.
Van Heerden remains positive about Afrimat’s prospects notwithstanding the recent slowdown of the economy, as the group’s primary focus is the infrastructure and road construction sectors which continue to flourish as a result of government’s ongoing investment. “We are confident that Afrimat’s improved BEE status following the deal with the consortium will further assist in securing new contracts in these sectors.”
He concludes: “Partnership with the consortium is to the immediate and ongoing benefit of all Afrimat stakeholders. It indicates the consortium’s confidence in the group’s prospects and will generate exciting new growth opportunities for Afrimat, further strengthening the value proposition and enabling the group to continue delivering value to stakeholders.”
Afrimat executes cost effective extraction of high quality Mining & Aggregates for the infrastructure, civil, construction and building markets and in addition adds value to produce concrete manufactured products and readymix concrete. For the year ended February 2008 the group reported headline earnings up by 79,5% to R92,5 million with headline earnings per share (HEPS) accordingly up 20,4% to 70,4 cents per share. Operating margins were solid at 22,4% reflecting the particularly healthy performance of two of the key divisions – ‘Mining & Aggregates’ and ‘Concrete Manufactured Products’.
Issued by: Envisage Communications
(011) 325 5944 / 073 479 4408
(011) 325 5944 / 083 300 1452
On behalf of: Afrimat Limited
Andries van Heerden, CEO
021 917 8840
Issue date: 3 July 2008