The MTN Group has revealed, within a media statement, that it intends to implement a new R9.9 billion Broad-Based Black Economic Empowerment (BEE) Transaction called MTN Zakhele Futhi, when its existing special purpose empowerment vehicle, MTN Zakhele, contractually unwinds on 24 November 2016.
According to the company, MTN Zakhele has created exceptional value for its 124 00 black investors, notwithstanding an extremely difficult nine months, increasing nearly fourfold from R20/share at inception in 2010, to about R77/share when the share price closed last Wednesday, 17 August 2016. That equates to a total return of about 400% and a compounded annual growth of about 26%.
The mandatory unwinding of MTN Zakhele on 24 November 2016, combined with the creation of the new MTN Zakhele Futhi scheme, will see MTN not only maintain its BEE targets as set out in the Information and Communication Technology Sector Code (the ICT Charter) but also adhere to the B-BBEE Act, allowing MTN to further embed empowerment and transformation in the DNA of its business.
The proposed MTN Zakhele Futhi scheme will take the form of a public offering where (i) qualifying black participants will be invited to subscribe for and beneficially own ordinary shares in MTN Zakhele Futhi (with a minimum investment amount of R2,000); and (ii) MTN Zakhele shareholders will be given the opportunity to re-invest a portion of their MTN Zakhele shares in MTN Zakhele Futhi. MTN Zakhele Futhi is a special purpose vehicle, which will hold approximately 4% equity in MTN Group.
The MTN shares, to be issued to MTN Zakhele Futhi, will be issued at R102.80, a 20% discount to the 10 day volume weighted average price (VWAP) per MTN share on 17 August 2016 of R128,50.
MTN Zakhele Futhi is designed to offer the black public an opportunity for long-term and sustainable benefits during the scheme’s proposed eight-year period, giving them exposure to MTN’s geographically diversified operations, earnings and growth markets.
MTN Group Executive Chairman Phuthuma Nhleko says that transformation and empowerment remain at the core of MTN’s ethos and culture. ”This new transaction, together with the continuing contribution of the MTN Zakhele transaction, will translate to an effective indirect “see-through” black ownership in excess of 30% of MTN’s South African operations,” he says.
The MTN Zakhele Futhi Offer is expected to be launched on 12 September 2016, and will close on 21 October 2016. Copies of the prospectus containing details of the MTN Zakhele Futhi Offer will be available at participating Nedbank branches and MTN stores around South Africa.
In addition to the new MTN Zakhele Futhi scheme, the MTN Board of Directors has proposed the introduction of a new employee share ownership plan (ESOP) for MTN staff, excluding directors and management. The new ESOP scheme will not require equity from eligible participants. Accordingly, MTN will issue approximately 0.1% of its issued share capital to be held in a trust for the benefit of these employees.
“Over the last 22 years, MTN has been one of the standard bearers of BEE and overall transformation amongst the top 10 JSE listed companies. MTN’s various empowerment initiatives, both for the general investor public and MTN employees, have enabled many South Africans to benefit from MTN’s growth through equity ownership, not to mention the significant progress MTN has made in other areas of the balanced BEE scorecard – including Preferential Procurement, Management and Control, Employment equity, Skills development and Socio-Economic Development. Our performance against these empowerment targets has earned MTN the AA Level 3 BEE Contributor status, according to EMPOWERDEX, of which we are immensely proud,” says Nhleko.