A big deal?

Old Mutual plc unveiled a 10-year empowerment deal – or more accurately three deals - that should provide broad-based empowerment, and a direct shareholding into one of the bigger financial services groupings in South Africa, via the various businesses –

“This is a big transaction – the value in currency terms – R7.3bn and R7.1 - goes to black people, with ownership percentages ranging from 11% to 13%, while the financing comes from within the Old Mutual group,” says Jim Sutcliffe, head of Old Mutual plc.

The next stage in Project Strips (the internal name of the project) is that there has to be UK court approval because of plc involvement. The local regulators will also be involved. Then shareholder approval, via extraordinary shareholder meetings, needs to be obtained.

Players that are directly affected include Nedcor and its retail brands, Mutual and Federal, Old Mutual, Chesthut Investments, Sphere, Mtha, Whiphold, WhipCapital, Izingwe, Brimstone, Evergreen Trust, Black Executive Trust, Black Management Trust, business partners and suppliers, and all Nedcor retail clients.

“We have been working hard towards this deal for a long time,” says the Old mutual plc head. “We must first be strong at home, and the normalization of the South African economy.”

“Everyone’s interests will be aligned,” he says.

“We are announcing our own approach to ownership issues in South Africa – this is a transformational set of deals, which will affect clients and the internal structures. Each element is designed to grow the businesses and the client base.”

He estimated that 500 000 people will be affected directly in this proposed set of deals, with employees a large component of the various deals. R724m of shares will be sold to black communities with favourable repayment terms, at the end of the 10 year period.

On an employee level it is believed that close to 18 000 black people – employees of the three retail brands – will take part in the share scheme.

Whiphold and Whip capital

Gloria Serobe says that they are delighted to be partners of choice. “We are mindful of the task ahead when delivering on the deal – we are excited. Today is a day when the women of South Africa should salute Old Mutual – the transaction also reflects increasing influence of women in South Africa. We hope you are ready for all the women.”

“The transaction has been discussed since May 2003, so we understand the issues that affect the three businesses. We bring our strategic skills, networks and distribution networks to the deal and the performance based contracts.

“We want to provide substantial benefits to all of our shareholders,” says Serobe.

Brimstone

Fred Robertson from the Brimstone consortium says: “We chose to get involved with Old Mutual because we understand the business and can now participate meaningfully and add value for all the shareholders. It is mutually beneficial and re-enforcing.

“There are 70 activities according to which the consortium will be measured amongst which includes an undertaking to generate R2.5bn lump sum new business in employee benefits.”

Old Mutual SA

Roddy Sparks for Old Mutual SA says that black ownership will account for 13.48% of Old Mutual SA, and met the criteria as set out by the Old Mutual board. One of the direct opportunities is the proposed development of a black broker base that will target the black residential areas.

“This has been an illusive market for Old Mutual,” says Sparks. “There are simply not enough intermediaries servicing the black market.”

Each black staff member and other staff who don’t participate in share schemes, will receive R7500 worth of plc shares and is deliverable in five years time. The funding for the transaction will be in the form of a grant.

Tom Boardman: “This is a happy occasion for a change, compared to some of the things we have had to do in the more recent past.”

“We (the South African banks) have a crucial daily role to play in South Africa. Our structure is a challenge because it includes our black customers and black women – a first in South Africa. We are going beyond mere compliance with the Financial Services Charter.”

The small print involves holding a primary account with Nedbank for a certain period, with some financial literacy training in the pipeline, while the share offer is open to all Nedbank clients. “The approach used is that clients can buy three shares and get the fourth share free – a good retail approach that hasn’t been don’t in terms of shares before,” says Boardman.