A big deal

16 July 2004 Angelo Coppola

The worst kept secret in the financial services sector is out – there is an empowerment deal involving the Tutuwa consortium, made up of Saki Macozoma’s Safika and Cyril Ramaphosa’s MCI and the Standard Bank group, and including the Liberty Group.

According to Jaco Maree, Standard Bank Group CEO, the intention behind the deal is not to directly affect the bottom line, but to tap into the wisdom, input and insight of the two new partners, to help the group to move into the future in a rapidly changing South African environment.

“Frankly put - We took a different view.”

According to Maree almost all the regulatory issues on the bank side have been dealt with, although there seem to be some hiccups on the Liberty side, which may delay things. The timeline for the implementation has been pencilled in for December 2004.

Standard Bank Group chairman Derek Cooper confirmed that the bank board voted on the deal yesterday (14.7.04), saying that it (the deal) will directly affect the ownership and control structure of the group, although there wasn’t a cash component in the deal.

The deal involves the Standard bank Group selling an effective 10% interest in its South African banking operations, and thus changing the shareholding table for the Standard Bank Group which will put Tatuwa in as the 6th biggest shareholder in Standard Bank.

At the same time Liberty announced that it would sell an effective 10% interest in its South African operations to a broad based grouping of black entities. This is a significant deal for the Liberty, with more R0.5bn in shares changing hands.

Liberty CEO Myles Ruck also confirmed that with the new share scheme the Liberty staff are set to become the 3rd largest shareholder block at about 7%.

“If that doesn’t give staff a reason to get up in the morning and go to work, then I don’t know what will,” says Ruck.

“The value of the transaction is R5.3bn; and the Standard Bank component is R4.1bn,” says Jaco Maree, Standard Bank Group CEO, leaving the remainder R1.2bn as the Liberty component.

The purchase price was calculated at the market close date at 9 July, less a 5% discount, “The discount is to ensure that there is some equity in the structure,” as Maree put it.

Tatuwa will hold 40%; black management and staff of Standard Bank and Liberty will hold 40%, while regional business community and educational groupings hold 20%, of the empowerment percentage.

Of this Safika owns 60% of the 40%; while MCI holds 40% of the 40%. Interestingly enough it was also announced that Standard Bank Group and Liberty were in negotiations to acquire a strategic minority shareholding in Safika.

This seems to be the largest black ownership deal announced in South Africa to date. The deal and empowerment is measured at R2.2bn.

There is also a general staff scheme where each qualifying staff member will get 100 ordinary shares immediately. People involved in the black management scheme or an existing share option scheme.

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