ABSA Group is planning a massive BEE transaction to increase black ownership to over 25% and benefit communities and staff, the lender said on Friday.
Absa said the details of the new deal had been finalised and would be implemented later this year, subject to shareholder approval. The transaction would strengthen the group’s BEE credentials and provide communities and staff with an opportunity to benefit from the value generated by the group.
Through the transaction 7% of the group’s shareholding would be allocated to structures to benefit ordinary black South Africans through a Corporate Social Investment (CSI) trust, and employees through a staff trust. The 7% stake equates to about R11.2 billion based on Absa’’s recent share prices, making the deal one of the largest B-BBEE transactions in recent times.
Black ownership of the bank group is expected to exceed the 25% threshold set out in the Financial Sector Charter.
A CSI trust, benefiting black communities, would indirectly own a 4% shareholding, while a staff trust would indirectly hold 3% of Absa Group. Black staff members in South Africa would receive just over 82% of the value of the staff trust.
A further equivalent of about 1% of Absa Group’s shareholding would be made available to staff employed by subsidiaries in other markets.
Absa Group CEO Arrie Rautenbach said: “The transaction was designed to align with our intent of being an active force for good, firmly demonstrating our commitment to broad-based black economic empowerment as we build a diverse and inclusive organisation not only in South Africa, but also more broadly across our business.”
A transaction circular would be published in May and shareholders would vote on the transaction at a general meeting on June 2 this year.
The 4% CSI trust would be focused on education and youth employability support for black South African beneficiaries. The trust would receive an annual dividend equal to 25% of the dividend per share paid by the group.
The CSI trust would spend the money it receives on CSI programmes in South Africa. The beneficiaries would be reviewed annually.
All staff in the 3% group shareholding component would receive an annual dividend equal to 25% of the dividend paid by the group. The shares would vest after a five-year period.
Absa’s share price fell marginally by 0.9% to R181.57 Friday morning, much in line with a similar decline in the bank sector index at the same time. It closed 0.8% lower at R181.78.
. “The transaction is the next big step in our broader transformation journey and, at the same time, recognises the role that our staff and communities play by giving them the opportunity to benefit from the value generated by the group.”
“Although primarily designed to achieve our black economic empowerment and transformation objectives, it was also important for us to ensure a portion of the benefit will be used to empower communities through education and youth employability initiatives,” said Rautenbach. “
“The transaction signals another substantial milestone in our ongoing efforts to play our role in society and it enables us to scale our efforts to empower communities,” said Rautenbach. “We believe that staff will also be incentivised in a way that promotes engagement and our espoused culture objectives.”
Staff employed in South Africa will participate in the 3% component of the transaction. All eligible employees will receive the same share allocation, irrespective of race, background or seniority. Black staff will receive an additional 20% allocation, in keeping with the priority of creating an inclusive economic landscape and government’s BEE objectives.
BUSINESS REPORT