FirstRand announes successful share placement to redeem R1.7BN of funding for 2005 BEE transaction
FirstRand Limited (FirstRand) today announced that the FirstRand Empowerment Trust (FRET) successfully placed approximately 77.8 million FirstRand shares at R19.50 per share and 4.4 million Discovery Holdings Limited (Discovery) shares at R34.00 per share as part of a process to re-finance the third party funding raised as part of the Group’s Black Economic Empowerment Transaction (BEE transaction) which was concluded in 2005.
In the BEE transaction, FirstRand facilitated the acquisition by FRET of an effective 6.5% interest in the issued share capital of FirstRand. FRET comprises four broad based BEE Groups, namely the Kagiso Trust, the Mineworkers Investment Trust, the WDB Group and the FirstRand Empowerment Foundation.
At that time, FRET raised external funding of approximately R2.93 billion from a group of international and local financial institutions. The term of the current funding is now nearing maturity and FRET, in consultation with FirstRand, commenced the process of refinancing this funding some 10 months ago.
In an accelerated book building offering, approximately 77.8 million FirstRand ordinary shares and 4.4 million Discovery shares (which were received by FRET as part of the unbundling of Discovery in 2007) were successfully placed with local and international institutional investors. The offering raised approximately R1.7 billion which will be used to repay a significant portion of the current FRET funding when it matures.
Commenting on the refinancing and placement FirstRand CEO Sizwe Nxasana said that the FirstRand BEE transaction has not only created meaningful value for the beneficiaries, it has also shown significant resilience during one of the most volatile and challenging periods in financial services. The refinancing of the transaction would ensure its sustainability for the next five years.
“In repaying a portion of the current funding outstanding, FirstRand believes that the economics and sustainability of the BEE transaction will be substantially enhanced over the next five years due to lower and more efficient gearing. ”
Following the placement, the aggregate level of FirstRand’s BEE shareholding reduces from 10% to 8.6% but this remains one of the highest levels of BEE shareholdings amongst the large financial services groups. Based on the value of the South African operations only, FirstRand will have a 10% BEE shareholding.
Nxasana says that the principles embodied in FirstRand’s BEE deal remain intact.
“FirstRand’s BEE deal was always designed to be a truly broad-based transaction which would deliver significant real and long term benefits to its BEE partners. FirstRand and FRET believe that this refinancing will achieve a more sustainable funding structure which will translate into even greater economic benefits for the beneficiaries for the remaining term of the BEE transaction, whilst enabling FRET to retain a significant shareholding in FirstRand.”
FirstRand and FRET envisage the overall refinancing being concluded and implemented shortly and will release further details on the overall refinancing in due course.
