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SOL
SOL
SSL - Sasol Limited - Announcement Of A 10% Black Economic Empowerment
Transaction
SASOL LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
(REG NO.: 1979/003231/06)
SHARE CODE JSE: SOL
NYSE: SSL
ISIN: ZAE000006896
US8038663006
("Sasol")
ANNOUNCEMENT OF A 10% BLACK ECONOMIC EMPOWERMENT TRANSACTION
1. INTRODUCTION
Sasol intends to undertake a major broad-based Black Economic Empowerment
("BEE") transaction with skills development and capacity building as a
central theme.
Subject to shareholder approval and the fulfilment of the conditions listed
in paragraph 6, it is proposed that Sasol will conclude a BEE transaction
in respect of 10% of its issued share capital ("the BEE transaction")
funded through a combination of equity, third party funding and
facilitation by Sasol. As the BEE transaction will be implemented at the
Sasol Limited level, the BEE participants will benefit from Sasol`s South
African and non-South African operations.
As a major participant in the South African economy, Sasol welcomes the
role that it can play in helping to meet the country`s socio-economic
objectives, as outlined in the Accelerated and Shared Growth Initiative for
South Africa (AsgiSA).
Sasol is committed to advancing these empowerment initiatives in ways that
are sustainable, credible and of benefit to all its stakeholders and to the
country as a whole. By focusing on broad-based empowerment, skills
development and capacity building, this transaction will go to the heart of
these objectives.
The proposed BEE transaction is designed to provide long term, sustainable
benefits to all participants and will have a tenure of ten years. It is
proposed to comprise the following four participant groupings (collectively
referred to as the "BEE participants") with their respective beneficial
ownership in Sasol:
- broad-based black South African public (the "black public") - 3,0%;
- selected BEE groups (the "selected participants") - 1,5%;
- all Sasol employees, black and white, below managerial level that are
permanently resident in South Africa (comprising 60% black and 40%
white employees), ("Sasol employees") and Sasol black managers and
black non-executive directors - 4,0%; and
- Sasol Foundation (the "Sasol Foundation") - 1,5%.
At the closing share price of R285 on 5 September 2007, the BEE transaction
has a value of approximately R17,9 billion, which will make it the largest
single broad-based BEE ownership transaction in South Africa to date.
In ensuring that the BEE transaction supports the full principles of broad-
based BEE, Sasol, in conjunction with the National Empowerment Fund (the
"NEF"), are working together on ways in which the NEF can participate in
facilitating the broad-based public offer.
2. DETAILS OF THE PROPOSED BEE TRANSACTION
2.1 Rationale and principles for the BEE transaction
In line with Sasol`s empowerment objectives, this BEE transaction has been
designed to provide long term benefits to a broad group of black South
Africans, with a focus on lower income groups, particularly women.
In order to structure the BEE transaction efficiently, Sasol will be guided
primarily by the following principles:
- from inception, the vesting of full voting and economic rights in
respect of 10% of the issued share capital of Sasol to the BEE
participants, through separate investment entities;
- focusing on broad-based BEE groups with significant involvement of
broad-based women`s groups;
- enabling active involvement of selected participants in Sasol`s
transformation, skills and capacity building programmes;
- creating a Sasol Foundation, which will focus on community development
and promoting skills and capacity development in South Africa;
- achieving a sustainable BEE transaction at a realistic economic cost
(inclusive of any dilution) to Sasol`s ordinary shareholders;
- ensuring compliance with the letter and spirit of the Broad-Based
Black Economic Empowerment Codes of Good Practice ("Codes of Good
Practice"); and
- broadening ownership in Sasol amongst its employees.
2.2 BEE participants
Black public
This participant grouping will allow all black South Africans an attractive
opportunity to participate in the economy through the BEE transaction.
Accordingly, all black South African citizens (as envisaged in the Codes of
Good Practice) and black-owned entities will be eligible to participate
through a public share offer.
The black public will benefit from 3,0% of the issued share capital of
Sasol.
Selected participants
This participant grouping will play an important role in furthering Sasol`s
transformation, skills and capacity building programmes.
A request for expression of interest from BEE groups will be published
shortly. In selecting participants, Sasol will give preference to, amongst
others:
- BEE groups that are currently involved in Sasol`s business (including
unions, franchisees, customers and suppliers);
- broad-based BEE groups focusing on the broader empowerment objectives
and in particular those focusing on capacity and skills development,
preferably in the fields of science and technology;
- broad-based BEE groups focusing on community upliftment projects in
the vicinity of Sasol`s main plants in South Africa, namely Secunda
and Sasolburg; and
- broad-based black women`s groups that fit the characteristics outlined
above.
Selected participants will benefit in aggregate from 1,5% of the issued
share capital of Sasol.
Sasol employees, Sasol black management and black non-executive directors
This participant grouping is intended to broaden ownership in Sasol among
its employees and to spread a significant portion of the benefit of the BEE
transaction amongst Sasol employees to ensure the sustained success of
Sasol.
Black and white Sasol employees, below managerial level, will participate
through an employee share ownership scheme (the "Broad-Based Employee
Scheme"). These employees will be allocated an equal number of shares. This
scheme will benefit from 3,7% of the issued share capital of Sasol of
which, (at current employment ratios), 2,2% relates to black employees and
1,5% to white employees.
Sasol black management and black non-executive directors will participate
in the BEE transaction through two separate employee share ownership
schemes, namely the "Black Management Scheme" and the "Black Non-Executive
Director Scheme", respectively. The participation in these two schemes will
collectively comprise 0,3% of the issued share capital of Sasol.
The Broad-Based Employee Scheme, Black Management Scheme and Black Non-
Executive Director Scheme are collectively referred to as "the Employee
Scheme". In terms of the Employee Scheme, participants will acquire a
vested right to receive ordinary shares (the "allocated shares") in Sasol,
which rights will vest at the inception of the Employee Scheme. These
participants will not be required to make any equity contributions and will
become entitled, from inception, to 50% of all dividends paid in respect of
their respective allocated shares.
Sasol Foundation
The primary focus of the Sasol Foundation is capacity building of black
South Africans, predominantly in the fields of science and technology.
This is a crucial contribution by Sasol to the establishment of skilled
people to support Sasol`s and South Africa`s transformation objectives.
The Sasol Foundation will also focus on community upliftment projects in
the vicinity of Sasol`s main plants at Secunda and Sasolburg.
This foundation`s life will extend beyond the term of the transaction to
become a lasting contributor to community upliftment.
The Sasol Foundation will benefit from 1,5% of the issued share capital of
Sasol.
3. STRUCTURE AND FINANCING OF THE BEE TRANSACTION
3.1 Guiding principles
The structure and financing of the BEE transaction will be guided by the
following principles:
- creating a sustainable BEE transaction that is acceptable to all
stakeholders;
- categorising BEE participants according to common characteristics and
objectives;
- maintaining adequate governance structures within each BEE participant
grouping to ensure that, inter alia, all contractual and financial
obligations can be met.
3.2 Ownership structure and financing
3.2.1 Ownership structure
In order to facilitate the financing of the BEE transaction and to ensure
sound governance of such funding arrangements, a number of investment
entities will be established. These entities will hold the interests of
BEE participant groupings in the issued share capital of Sasol. The BEE
participants will, from inception, have full voting and economic rights
associated with the respective investment entities` interests in the issued
share capital of Sasol.
Percentage ownership in Sasol is shown throughout this announcement after
implementation of the BEE transaction and the intended share repurchases
referred to in paragraph 4 below.
3.2.2 Financing
Due to the size of the proposed BEE transaction and market constraints on
the availability of third party funding, the BEE transaction will be
financed through an optimal combination of equity, third party funding and
Sasol facilitation.
The Selected Participants and Black Public investment entities will be
funded by way of equity contributions and third party funding (external
preference shares), with appropriate Sasol facilitation. The Employee
Scheme investment entity and the Sasol Foundation will be funded entirely
through Sasol facilitation.
Preferred ordinary shares
In order to maximise the quantum of external preference shares issued to
third party funders, Sasol will create a new class of unlisted shares,
namely preferred ordinary shares with a fixed cumulative dividend right.
Sasol will issue 28,2 million of these preferred ordinary shares, equal to
4,5% of Sasol`s total issued share capital, to the Black Public investment
entity (3,0%) and the Selected Participant investment entity (1,5%).
It is intended that these shares will carry a fixed cumulative preferred
dividend right for a period of ten years. This fixed preferred dividend
right will rank ahead of the dividend rights of existing ordinary shares.
In all respects, other than the fixed preferred dividend rights, the
preferred ordinary shares will rank equal to the existing Sasol ordinary
shares. After ten years, preferential treatment will cease and these
shares will be identical to Sasol ordinary shares and will then be listed
on the JSE Limited as ordinary shares.
3.2.2.1 Black public
The black public will participate through an unlisted entity, (the "Black
Public investment entity"). The Black Public investment entity will
subscribe for 18,8 million Sasol preferred ordinary shares (equivalent to
3,0% of the Sasol issued share capital).
The black public will be required to hold their shares in the Black Public
investment entity for a minimum period of five years. It is envisaged that
a market will then be created to enable the black public to trade their
shares in the Black Public investment entity with other black South
Africans. At the end of the transaction, the Black Public investment entity
will distribute the remaining Sasol ordinary shares, after all associated
outstanding obligations have been settled, to the black public.
It is envisaged that the Sasol preferred ordinary shares owned by the Black
Public investment entity will be financed through:
- equity contributions from members of the black public;
- third party funding in the form of preference shares with no recourse
to Sasol; and
- third party funding in the form of preference shares with Sasol
facilitation, subject to section 38 of the Companies Act, 1973, being
amended.
3.2.2.2 Selected participants
The selected participants will participate through an unlisted entity (the
"Selected Participants investment entity"). The Selected Participants
investment entity will subscribe for 9,4 million Sasol preferred ordinary
shares (equal to 1,5% of Sasol`s issued share capital).
It is envisaged that the Sasol preferred ordinary shares owned by the
Selected Participants investment entity will be funded and issued on a
similar basis to the Black Public investment entity described above.
The selected participants will be required to hold their shares in the
Selected Participants investment entity for the duration of the
transaction. At the end of that period, the Selected Participants
investment entity will distribute the remaining Sasol ordinary shares,
after all associated outstanding obligations have been settled, to the
selected participants.
3.2.2.3 Employee Scheme
The Employee Scheme investment entity will subscribe for 4% (25,1 million)
of Sasol`s ordinary shares at a minimum value ("nominal value"). At the
end of the transaction period, Sasol will have an option to repurchase a
number of the shares determined in accordance with a formula at the same
nominal value ("repurchase option").
To ensure flow-through of benefits to participants from inception, the
Employee Scheme investment entity will receive 50% of dividends declared
with respect to the Sasol ordinary shares held, which dividends will be
distributed to Sasol employees, Sasol black management and black non-
executive directors. At the end of the transaction, these participants
will also receive their respective allocated shares remaining after the
repurchase option has been exercised.
The formula in respect of the repurchase option takes into consideration:
- the market value of the Sasol ordinary shares issued at inception of
the BEE transaction is escalated by a growth factor of approximately
11,5% per annum;
- the value of 50% of the dividends, which do not accrue to the Employee
Scheme investment entity; and
- the Sasol ordinary share price at the end of the transaction.
3.2.2.4 Sasol Foundation
The Sasol Foundation will subscribe for 1,5% (9,4 million) of Sasol`s
issued ordinary shares at a nominal value. It is envisaged that the Sasol
Foundation will be a public benefit organisation.
The Sasol Foundation will be financed through a similar structure as the
Employee Scheme investment entity described above.
4. Share repurchase programme to mitigate dilution
Pursuant to the general authority from its shareholders, Sasol, through a
wholly owned subsidiary, has repurchased 14,9 million Sasol ordinary shares
(2,4% as at 30 June 2007). Sasol may recommence its repurchase programme
after the release of its annual results. Share repurchases will be funded
from available cash.
The BEE transaction will require the issue of 34,5 million Sasol ordinary
shares and 28,2 million Sasol preferred ordinary shares to the BEE
participants. To mitigate dilution to existing ordinary shareholders, Sasol
intends to repurchase an equivalent number, 62,7 million, of Sasol ordinary
shares. To the extent that prior to the announcement of the remaining terms
of the BEE transaction, the number of ordinary shares held by the Sasol
wholly owned subsidiary, which has undertaken the repurchase programme, is
less than 62,7 million Sasol ordinary shares, Sasol will consider a share
repurchase by way of a scheme of arrangement in terms of Section 311 of the
Companies Act, 1973,("the scheme"). If the scheme is approved by the
shareholders, they will sell to Sasol a pro rata portion of their shares at
the prevailing market price. The scheme shares will be acquired by a Sasol
wholly owned subsidiary from available cash.
5. Illustrative financial effects
The unaudited pro forma financial information of Sasol was prepared in
order to provide the illustrative financial effects of the BEE transaction
and intended share repurchase programme on Sasol, assuming that the BEE
transaction and share repurchases had been fully implemented on 1 July
2006. The unaudited pro forma financial effects are based on the
assumptions set out below and include assumptions on share price and
funding costs, which can only be determined in the future.
The unaudited pro forma financial information is the responsibility of the
directors of Sasol and was prepared for illustrative purposes only and may
not, because of its nature, fairly present Sasol`s financial position,
changes in equity and results of its operations or cash flows. It does not
purport to be indicative of what the financial results would have been, had
the BEE transaction and share repurchases occurred on a different date.
Unaudited pro forma financial information per share before and after the
implementation of the BEE transaction and intended share repurchases is set
out in the table below:
Before After Percenta
ge
change
(%)
Attributable earnings per 2 735 2 406 (12,0)
share3 cents
Attributable earnings per 2 735 2 765 1,1
share (excluding the share-
based payment expense)4 cents
Diluted earnings per share cents 2 702 2 374 (12,1)
Headline earnings per share5 cents 2 537 2 191 (13,6)
Net asset value per share6 cents 10 055 8 582 (14,6)
Net tangible asset value per 9 857 8 367 (15,1)
share6 cents
Weighted average number of 622,6 574,8 (7,7)
shares in issue7 million
Weighted average diluted 630,3 582,5 (7,6)
number of shares in issue7 million
Number of shares in issue 612,8 565,0 (7,8)
(excluding share repurchase) million
7
Notes and assumptions:
1. The unaudited pro forma financial information is based on the audited
financial position of the Sasol Group as of 30 June 2007 and the results of
its operations for the year ended 30 June 2007.
2. The unaudited pro forma financial information per share after the BEE
transaction and intended share repurchase programme are based on the
following assumptions:
(a) the BEE transaction and share repurchase programme were implemented with
effect from 1 July 2006 for calculation of the income statement effects and
on 30 June 2007 for calculation of the balance sheet effects;
(b) 34,5 million Sasol ordinary shares were issued, at nominal value, to the
Employee Scheme and the Sasol Foundation. 28,2 million Sasol preferred
ordinary shares were issued, at the closing share price of R285 on 5
September 2007, to the Selected Participants and Black Public investment
entities;
(c) the Employee Scheme, Sasol Foundation, Selected Participants and Black
Public investment entities are consolidated for accounting purposes. In
this regard any shares issued to these entities are regarded as treasury
stock;
(d) the 47,8 million Sasol ordinary shares repurchased at the closing share
price of R285 on 5 September 2007, in terms of the intended share
repurchase programme are treated as treasury stock;
(e) the fixed preferred ordinary dividend, which is payable in respect of the
28,2 million Sasol preferred ordinary shares amounts to approximately
R17,35 per share; and
(f) the finance cost applicable to the implementation of the BEE transaction
and the intended share repurchase programme, for the twelve months ended 30
June 2007, is based on the relevant prevailing market rates.
3. Attributable earnings per share are computed by dividing attributable
earnings by the weighted average number of shares in issue after taking
into account the effect of the intended share repurchase programme.
4. In accordance with International Financial Reporting Standard 2 - Share-
based Payment (IFRS 2), attributable earnings for the year ended 30 June
2007 has been adjusted by R2,1 billion, assuming shares were issued to the
BEE participants at the closing share price of R285 on
5 September 2007. The share-based payment expense is calculated based on
prevailing market conditions and changes in these conditions can give rise
to material movements in this expense.
The share-based payment expense includes R0,1 billion relating to the
Employee Scheme. The total share-based payment expense associated with the
Employee Scheme amounts to R1,1 billion, which will be expensed in the
income statement over the period of ten years. The total share-based
payment expense for the BEE transaction, therefore amounts to R3,1 billion.
5. Headline earnings are calculated in accordance with the requirements of
Circular 8/2007 - Headline Earnings.
6. Net asset value per share and net tangible asset value per share have been
calculated after taking into account the shares repurchased.
Due to the consolidation of the Selected Participants and Black Public
investment entities, the effect of third party funding (external preference
shares) raised by these entities has been taken into account in the
calculation of the net asset value and net tangible asset value per share
after the BEE transaction.
7. Share repurchases are excluded from the weighted average number of shares
and the number of shares in issue after implementation of the BEE
transaction and repurchase programme. The weighted average number of shares
also excludes the shares issued to the Employee Scheme, Sasol Foundation,
Selected Participants and Black Public investment entities, which shares
are treated as treasury stock.
8. Sasol complies with the requirements of AC 503 - Accounting for Black
Economic Empowerment Transactions and Circular 8/2006 - Disclosure of
Accounting for Black Economic Empowerment Transactions.
6. CONDITIONS PRECEDENT
The implementation of the proposed BEE transaction will be subject, inter
alia, to the following:
- obtaining Sasol shareholder approval for the BEE transaction, including the
scheme;
- finalising the selection of the BEE groups;
- concluding the financing agreements with third party funders;
- concluding agreements with all other relevant parties;
- obtaining the requisite regulatory approvals; and
- compliance with all applicable laws and regulations.
The external funding in the form of preference share capital with Sasol
facilitation is based on the assumption that the amendment of section 38 of
the Companies Act, 1973 will become law before the further announcement
referred to in paragraph 7 below is made. Should section 38 not be amended
prior to such an announcement being made, an alternative funding
arrangement will be announced at that time.
7. FURTHER ANNOUNCEMENT EXPECTED IN FIRST HALF OF 2008
A further announcement will be made during the first half of 2008 after the
relevant agreements have been signed and third party financing arrangements
have been finalised. Such announcement will provide the detailed terms of
the BEE transaction, including the scheme, financial effects and expected
economic costs of the BEE transaction, which cost is anticipated to be
comparable to other BEE transactions concluded to date.
Rosebank
10 September 2007
Sponsor
Deutsche Securities (SA) (Pty) Limited
Merchant bank and transaction sponsor
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
Legal adviser
Edward Nathan Sonnenbergs Inc
Disclaimer - Forward-looking statements
We may in this document make statements that are not historical facts and relate
to analyses and other information based on forecasts of future results and
estimates of amounts not yet determinable. There are forward-looking statements
as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words
such as "believe", "anticipate", "expect", "intend", "seek", "will", "plan",
"could", "may", "endeavour" and "project" and similar expressions are intended
to identify such forward-looking statements, but are not exclusive means of
identifying such statements. By their very nature, forward-looking statements
involve inherent risks and uncertainties, both general and specific, and there
are risks that predictions, forecasts, projections and other forward-looking
statements will not be achieved. If one or more of these risks materialize, or
should underlying assumptions prove incorrect, actual results may be very
different from those anticipated. The factors that could cause our actual
results to differ materially from the plans, objectives, expectations, estimates
and intentions expressed in such forward-looking statements are discussed more
fully in our annual report under the Securities Exchange Act of 1934 on Form 20-
F filed on November 2, 2006 and in other filings with the United States
Securities and Exchange Commission. Forward-looking statements apply only as of
the date on which they are made and Sasol does not undertake any obligation to
update or revise any of them, whether as a result of new information, future
events or otherwise.
The Sasol shares that will be allocated in terms of the BEE transaction have not
been and will not be registered with the United States Securities and Exchange
Commission under the US Securities Act of 1933, as amended, or any securities
laws of any state of the United States and may not be offered or sold in the
United States absent an exemption from registration requirements.
Date: 10/09/2007 07:06:01 Produced by the JSE SENS Department.
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