The Khula Sizwe broad-based black economic empowerment (B-BBEE) share scheme launched by Barloworld involves the sale of R2.9 billion of its properties to Khula Sizwe.
Khula Sizwe’s properties include motor retail properties with a market value of R1.68bn, industrial properties worth R914 million, commercial properties worth R95m, mixed commercial and industrial properties worth R13m, residential properties worth R29m and development properties worth R130m.
This is being funded 80percent through an external loan and subscriptions for Khula Sizwe shares via the public offer, as well as from separate management and employee share trusts. Barloworld shareholders approved the empowerment scheme, which will lift Barloworld’s overall black empowerment to 48 percent, at a general meeting on February 15.
According to the prospectus published on the www.barloworldkhulasizwe.com website, shareholders in the new company will be unable to sell their shares for five years.
However, the new company is expected to use the proceeds of rentals from the properties, which are mostly tenanted by Barloworld companies and which are expected to increase by 8 percent a year, to fund the operational costs of Khula Sizwe, as well as to reduce its debt over a 10-year period.
Khula Sizwe will also be able to acquire other properties from third parties and it will be able to dispose of properties it acquired from Barloworld after three years, although Barloworld will have the right of first refusal to purchase the property.
Tantaswa Fubu, Barloworld spokesperson and executive for human capital, said the offer to give black South Africans the opportunity to participate in a property-based B-BBEE share scheme that is not related to a share price was a first of its kind in this country, ANA reported.
“Through Khula Sizwe, shareholders have the opportunity to invest in a property company with less volatility than a share-based scheme,” Fubu said.
“The company has guaranteed rental income from Barloworld as Khula Sizwe’s tenant, making their investment more stable with predictable cash flows, and reducing risk while creating value for shareholders.”
Fubu said Barloworld’s B-BBEE transaction provided the company with the unique opportunity of aligning the objective and prospects of its employees and shareholders.
The public offer of Khula Sizwe shares closes at 4pm on May 31.
Barloworld management have hedged against the possibility of a R120m minimum subscription not being taken up by public investors – the Management Trust will subscribe for the entire R163.4m of equities if this happens.
Barloworld’s management will likely hold a minimum of 38percent of the Khula Sizwe shares through the Management Trust, while Barloworld employees will hold 32 percent of Khula Sizwe after the public offer.
Khula Sizwe’s board comprises only of three non-executive directors – Tantaswa Fubu, Rebecca Pole and Gugu Sepamla.