Johannesburg - ArcelorMittal South Africa is signing a new broad-based black economic empowerment deal, but the agreement comes at a cost to its bottom line.
In a statement issued on Wednesday, the company says the total notional value of the deal is R2.3 billion.
However, the deal will hurt its bottom line, although AMSA says this effect has been magnified because the economic cost of issuing new shares will either be expensed immediately, or - shares issued to staff - will be amortised.
Its pro rata analysis shows headline earnings per share will drop by 192 percent to a 1.3c a share loss, from a loss of 0.45c previously. The deal will cost it R28 million in addition, it says.
The deal will see Amandla We Nsimbi, which has been created for the transaction, receive 17 percent of AMSA, the empowerment company. It, in turn, will be owned by Likamva Resources, AMSA’s strategic black partner.
Likamva will also introduce broad-based social and community development organisations to Amandla, within 2 years.
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Likamva is a wholly black-owned company, with black women holding 58 percent and counts among its founders and principals Noluthando Gosa, founder of Akhona Group, which is invested in the property and energy sector, Jabu Moleketi, chairman of several entities; Leslie Maasdorp, the VP of the BRICS New Development Bank; Themba Hlengani, chairman of the Xitsavi Group; Tshepo Mahloele, CEO of Harith Fund Management and Warren Wheatley, chief investment officer of TSS Capital.
The other shareholders of Likamva include individuals and companies involved in the engineering, construction, energy, environmental and automotive sectors.
AMSA will also issue 5.1 percent of a new class of notionally funded shares to the ArcelorMittal South Africa Employee Empowerment Share Trust, which will benefit staff and management, it says.
The previous employee scheme was diluted from 4.7 percent to 1.9 percent when the company went through a rights issue.
It adds there will be a decade-long lock in period.
“AMSA recognises that its management and employees play an important role in the growth of the company and has therefore included significant employee and management participation, thereby ensuring alignment of interests for all stakeholders.”
AMSA’s announcement follows its news on February 12 that it had entered into talks with Likamva to conclude an empowerment deal.
It adds the deal is just one part of its endeavours to transform, and it will pursue other initiatives that form part of government’s broad-based black economic empowerment scorecard. However, dividends worth 5 percent of AMSA’s dividends will only start flowing in the 7th year, it says.
Its long-term aim is to achieve at least 25 percent black ownership, it says.
AMSA, which employed almost 10 000 people in the country at the end of 2015, has struggled to restore profit because of a surge in Chinese imports at prices as much as a quarter below local production costs. The company said in July it may return to profit for the first time since 2010 after South Africa’s government introduced duties on steel imports at AMSA’s request.
IOL