MTN unveils second BEE deal, MTN Zakhele Futhi worth R9.9 billion

South Africa’s mobile phone giant MTN has announced a second black economic empowerment (BEE) deal, under which it will sell a 4% stake in the mobile phone company, worth about R9.9 billion, to black investors. By Gugu Lourie

The mobile phone operator said the new MTN BEE transaction, together with the continuing contribution of the MTN Zakhele empowerment transaction, translates to an effective indirect “see-through” black ownership in excess of 30% of MTN’s South African operations.

MTN will provide an effective transaction discount of 20%, through additional equity in the structure.

BEE is designed to widen ownership of the South African economy, which is still mainly in white hands 22 years after the end of apartheid.

According to the company, the transaction aims to broaden its South African effective BEE ownership through a black public offer to black individuals and groups and an opportunity for MTN Zakhele shareholders to re-invest in MTN Zakhele Futhi as part of the structured unwinding of MTN Zakhele.

MTN Zakhele, the Black Economic Empowerment (BEE) scheme of MTN, will be maturing in November 2016.

Established in 2010, MTN Zakhele is a vehicle for previously disadvantaged South Africans to invest in MTN Group.

MTN Zakhele was transferred from the over-the-counter (OTC) to the JSE’s BEE board from November 5. It owns 48.5 million ordinary and preference shares in MTN, translate into a 4% shareholding in the mobile phone giant. Most MTN Zakhele shareholders, some 87%, hold fewer than 500 shares each, ensuring the broad-based nature of the scheme.

The performance of the MTN Zakhele share price is linked to that of MTN Group. To this end, the decline in the share price of MTN Group over the past few months due to, among other factors, the imposition by the Nigerian authorities of a fine has also led to a decline in the share price of MTN Zakhele.

According to the company, the transaction aims to broaden its South African effective BEE ownership through a black public offer to black individuals and groups and an opportunity for MTN Zakhele shareholders to re-invest in MTN Zakhele Futhi as part of the structured unwinding of MTN Zakhele.

The unwinding of the MTN Zakhele scheme is expected in November 2016. MTN Zakhele investors have an option to take a cash pay-out, receive shares or reinvest the money in MTN Zakhele Futhi.

The new empowerment builds on the success of the first phase of MTN’s BEE strategy, launched in 2010, when four percent of the group was sold to black investors.

As part of the new BEE deal, MTN will introduce a new employee share ownership plan (ESOP), excluding management and directors, requiring no equity contribution from eligible participants to augment MTN’s South African BEE initiatives. Accordingly, MTN will issue approximately 0.1% of its issued share capital to be held in a trust for the benefit of these employees.

MTN expects that the 2016 ESOP will be effective on or about 24 November 2016. Participation in the 2016 ESOP is being facilitated by MTN and/or the relevant employer companies within the MTN group).

The public offer for MTN Zakhele Futhi will be launched on September 12 and closes on October 21. Copies of the prospectus containing details of the MTN Zakhele Futhi Offer will be available at participating Nedbank branches and MTN stores around South Africa.