JOHANNESBURG - South African insurer Momentum Metropolitan Holdings Ltd. and Absa Group Ltd. agreed to fund a stock-ownership program in which 3% of the insurer’s shares will be offered to Black employees.
Momentum staff will acquire 44.9 million ordinary shares as the company seeks to align its ownership with the demographics of its client base, the company said Friday. The empowerment transaction is one of the methods South African firms use to shake up shareholdings after the country’s apartheid system channeled most wealth to White people to the disadvantage of Blacks.
The deal will be funded by issuing preference shares through a special-purpose vehicle to Momentum and Absa, for as much as R700 million ($42 million) and R350 million respectively, Momentum said. About 26.9 million shares are in Momentum’s treasury and about 18 million will be bought in the open market, it said. The shares will be held by the iSabelo Trust, which is being set up to manage the transactions.
As much as 20% of the trust’s distributable income, excluding special distributions, is payable to staff until the special-purpose vehicle is no longer a beneficiary. Shareholders will vote on the plan on Nov. 26.
Units in the program will be allocated as follows:
- 85% of program’s proceeds will accrue to Black employees and at least 55% to Black women employees
- The eligibility of staff to participate will be determined by instructions set by Momentum
- Shares will be subject to a maximum vesting period of seven years and will become redeemable upon expiry of a period of 10 years after first being allocated
- The plan is for the program to run for a maximum of 15 years.
BLOOMBERG