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ArcelorMittal South Africa Announces BEE Transaction with Ayigobi Consortium

08/11/2010 - ArcelorMittal South Africa has announced a broad-based Black Economic Empowerment (BEE) transaction to introduce a 26% BEE shareholding into its operations. The transaction facilitates participation by the Ayigobi Consortium and an Employee Share Ownership Plan for more than 8500 employees.

ArcelorMittal South Africa has announced a broad-based Black Economic Empowerment (BEE) transaction to introduce a 26% BEE shareholding into its operations. The BEE transaction fulfills key objectives for the company, including moving toward compliance with legislated empowerment equity ownership requirements and positioning it to achieve improved self sufficiency and growth.
 
Aggregate transaction value is more than R9 billion.
 
The transaction facilitates participation by the Ayigobi Consortium, led by Sandile Zungu, and an Employee Share Ownership Plan (ESOP) for more than 8500 employees. The Ayigobi Consortium will include additional broad-based groupings.
 
ArcelorMittal South Africa CEO, Nonkululeko Nyembezi-Heita, said, “Introducing broad-based BEE shareholders to our operations has been a priority for ArcelorMittal South Africa for some time. We started assessing the transaction in 2008, but the global economic downturn made it impossible to implement a suitable transaction structure at that time.
 
“As soon as the markets returned to some form of normality, we proceeded to develop this transaction with a strong partner, which is an important step toward achieving our overall transformation objectives,” Nyembezi-Heita continued. “I look forward to welcoming our new partners, including more than 8500 staff, to our business as shareholders and trust that, together, we will have a mutually beneficial relationship.”
  
The Ayigobi Consortium will remain a shareholder for up to 14 years, while the ESOP participants will benefit over a five-year period, Nyembezi-Heita noted.
 
Other participants include Mabelindile Luhlabo, Mojalefa Mbete, Pragat Investments (Jagdish R Parekh), Prudence Mtshali, Phemelo Sehunelo, Zebo Tshetlho, Zico (led by Sandile Zungu), Oakbay Investments (Gupta family members) and Mabengela Investments (led by Duduzane Zuma). The remaining 25% of the Ayigobi Consortium will be allocated to women, youth groups, and new entrants to the BEE landscape whose composition is still being finalized.
 
To effect the transaction, ArcelorMittal South Africa will transfer all its assets to a new wholly owned subsidiary, ArcelorMittal South Africa Operations (OPCO), in return for 74% of OPCO. The remaining 26% shareholding in OPCO will be 21% held by the Ayigobi Consortium and 5% by the ESOP.
 
ArcelorMittal South Africa and OPCO will have identical Boards of Directors, and the Ayigobi Consortium will have the right to appoint one director to the board.
 
Separately, ArcelorMittal South Africa has entered into an agreement to acquire 100% of Imperial Crown Trading (ICT) to secure its supply base. The shareholders of ICT have been included, inter alia, as participants in the Ayigobi Consortium.
 
Nyembezi-Heita said: “Whilst we continue to vigorously pursue our arbitration with Kumba Iron Ore Ltd., we feel our acquisition of ICT is a prudent decision based on strong commercial grounds given that vertical integration is a crucial component of ArcelorMittal South Africa’s ability to remain competitive.”