Johannesburg - Merrill Lynch said yesterday that it would sell up to 15 percent of its South African business to black investors, making it the second international investment banking group to do a black economic empowerment (BEE) deal.
The largest US securities company by market value announced the empowerment deal as it promised to expand its business in South Africa, Turkey and the Middle East.
The Merrill Lynch deal comes more than a year after Deutsche Bank sold 25 percent of its local unit to black investors in February last year.
Merrill Lynch said it would immediately sell 8.5 percent of Merrill Lynch South Africa (MLSA) to its employees (2.5 percent), Tselane Basadi - a women's professional group (5 percent) - and an education trust (1 percent).
Tselane Basadi and the MLSA Black Employees Trust will have immediate full voting rights through board representatives.
The deal, which will also focus on training more black people in financial services skills, is fully funded by Merrill Lynch. The BEE investors may sell their shares only after 2014.
The transaction will allow the BEE partners access to the global businesses of the investment bank group through ownership of shares in the US parent company.
The company said the transaction was not dependent on the performance of its stock or ongoing valuation of MLSA.
The deal is unique in that the Tselane Basadi partners are professionals and include three investment bankers who will play an active role in an advisory capacity to grow the investment banking revenue and get new clients for MLSA.
MLSA chairman Humphrey Borkum said this was the "biggest deal" ever done by the firm and it was meant to support black participation.
Adam Horowitz, the chief executive of MLSA, said the investment banking firm had a global philosophy of diversity and the BEE deal in South Africa fitted well with that.
There were revenue opportunities from the transaction. "There is real shortage of financial skills," Horowitz said. The transaction was driven in part by these concerns.
MLSA will work closely with universities to ensure that young black students get the relevant skills.
Namane Magau, a representative of Tselane Basadi who is also the president of the Businesswomen Association of SA, said the deal would contribute to the development of skills and would increase the pool of female investment bankers.
The global platform that Merrill Lynch offered was crucial for skills development, she said. The group would also assist MLSA in enhancing employee development and support empowerment objectives of the firm.
Bob Wigley, the chairman of Merrill Lynch Europe, Middle East and Africa, said the firm had been focusing on minority groups in its Asian and European businesses.
The South African black empowerment deal was a "subset" of the global initiative to promote minority groups.
Wigley told Bloomberg yesterday that Merrill Lynch would seek to do more business in other southern African countries by using its Johannesburg-based unit to expand.