High court sanctions Glenrand MIBs scheme of arrangement

31 March 2006 Steve von Roretz

The High Court today sanctioned the Scheme of Arrangement, clearing the way for an increase in Glenrand MIBs BEE shareholding from 6% to 27.7%.

The R103 million transaction introduces two new broad-based BEE groups - Ayavuna Women's Investments and Matemeku Investments - and increases the shareholding of Glenrand MIB's long-standing BEE partner, Kunene Brothers Holdings. In three separate transactions worth R103 million in total, each of the three empowerment groups will acquire 5.8% of the ordinary equity in Glenrand MIB. This will leave Ayavuna Women's Investments and Matemeku Investments with 5.8% each, and the Kunenes with 11.2%. A further 4.9% will be acquired by the Glenmib Employee Empowerment Trust on behalf of formerly disadvantaged employees of Glenrand.

The transaction was approved by Glenrand shareholders at a Scheme and a general meeting on 17 March 2006. Chief executive officer Steve von Roretz says that, as expected, the Court sanctioned the deal disregarding objections from a disgruntled former employee who acquired 500 shares in Glenrand with the apparent aim of delaying the proceedings.

In essence, what this means is that Glenrand MIB may now proceed with the finalisation of its empowerment deal, which results in 27.7% of its equity in the hands of BEE partners, he says. Obviously, this is just the start of a process of transformation that will affect every part of the business, from skills development to procurement.

The Scheme of Arrangement entails a wholly-owned subsidiary of Glenrand MIB, Risk Funding Services, purchasing 6.7% of the groups issued share capital with a further 4.3% to be acquired by the Glenmib Employee Empowerment Trust. Von Roretz says the Scheme of Arrangement will enable the company to mitigate the dilutory effect of issuing new shares to the BEE partners. In terms of this Scheme of Arrangement, Glenrand MIB ordinary shareholders have agreed to sell approximately12 shares for every 100 shares held at a price of R2.27 a share.

As part of the empowerment enhancement of Glenrand MIB, the company will acquire from the Glenmib Employee Empowerment Trust the 49,9% in Glenrand MIB Makgulong not already owned for a consideration of R23 million, which was a negotiated price and found to be fair and reasonable by independent EY Corporate Finance. In turn the Glenmib Employee Empowerment Trust is able to participate at group level, as mentioned above. Makgulong, a majority black-owned empowerment structure, is to be acquired in its entirety by Glenrand MIB so as to increase the groups net profit, thereby offsetting the dilutory effects arising from the issue of new shares to the groups BEE partners. Now that the Scheme of Arrangement has been approved by the High Court, Glenrand MIB qualifies as an empowered company and there is no need to have the separate Makgulong empowerment structure.

The sanctioning of this Scheme of Arrangement by the High Court is an historic milestone for Glenrand MIB and a crucial part of our growth strategy going forward. We are delighted to be able to welcome our new BEE partners on board, and I think the fruits of this new relationship will become evident in the months and years ahead.

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