MTN goes big on BEE

Telecommunications company MTN Group (MTN) on Thursday announced an 8.1 billion rand Broad-Based Black Economic Empowerment transaction consisting of up to 4 percent equity ownership in MTN.

The company said it is the largest empowerment transaction in the telecoms sector in South Africa to date.

The deal translates to an additional effective indirect black ownership of up to 29.1 percent of MTN’s South African operations.

MTN intends to implement the proposed MTN BEE transaction by means of a public offering in terms of which the Black Public will be invited to subscribe for and beneficially own ordinary shares in the share capital of BIC, and the acquisition of and subscription for MTN Shares by BIC, it said.

The aim of the BEE transaction is to provide as many members of the Black Public, as possible with the opportunity to acquire MTN Shares, the group said.

BIC will apply the preference share funding raised by it in terms of the issue of A preference shares and B preference shares in the issued share capital of BIC, the equity raised in the BIC Public Offer, any equity raised by it from MTN in respect of the MTN Underwrite Option, the cash donation up to a maximum of R1.294-billion by MTN and the notional vendor finance to acquire up to a maximum of 35,155,609 MTN Shares from PIC.

BIC will also subscribe for new MTN Shares to be issued by MTN.

The MTN BEE Transaction size is anticipated to be 4 percent of MTN’s issued ordinary share capital on a fully diluted basis, but may be scaled down should public subscriptions under the BIC Public Offer not be sufficient to allow for this.

The MTN Share price at which the MTN BEE Transaction will be implemented is 107.46 rand, equal to the 20-trading day volume weighted average price of an MTN share, to the calculation date.

“BEE is integral to the ethos of MTN and MTN believes that broad-based BEE participation is important to its future success as a Group,” MTN said as the rationale for the transaction.

MTN said that the economic cost of implementing the MTN BEE Transaction for MTN and its shareholders is estimated to be approximately R2.277-billion . This represents approximately 1.1 percent of the market capitalisation of MTN. Of that total, approximately R983-million (0.5 percent) arises from the provision of Notional Vendor Finance by MTN to BIC and the balance of approximately R1.294-billion (0.6 percent) represents the facilitation cost associated with the MTN Donation.

Transaction costs of approximately R126-million, as a result of the MTN BEE Transaction and ESOP, would also be incurred.

It is anticipated that the BIC Public Offer will be launched on or about Monday, 30 August 2010.

BEE Participants will be invited to subscribe for BIC Ordinary Shares at a price of 20 rand per BIC Ordinary Share.

The minimum subscription required for participation in the BIC Public Offer is R2000 (i.e. 100 BIC Ordinary Shares), with no maximum on subscriptions.

In addition to the MTN BEE Transaction, MTN said it would also issue approximately 0.1 percent of its issued ordinary share capital on a fully diluted basis to an employee share ownership plan (ESOP), for the benefit of eligible MTN employees.

credit: I-Net Bridge