SOUTH AFRICA: PPC Announcement of a Second Phase Empowerment Transaction Resulting in 26% Black Ownership of PPC South Africa

Pretoria Portland Cement Company Limited (PPC) is pleased to announce a second phase broad-based black economic empowerment transaction which entails the placing of an additional 39.3m ordinary shares or 6.5% of PPC's increased share capital under black ownership. Following the first phase BBBEE transaction for 15.3% during 2008, this will increase the direct black ownership of the PPC Group to 20.8%.


Taking into account the 80:20 revenue split between the Groups South African and international businesses the transaction will result in an effective 26% black ownership of PPC's South African operations and enable the company to meet the South African mining rights conversion requirements as set out by the Department of Mineral Resources in terms of the Mining Charter.


Of the additional shares being issued the major portion or 68% shares will be issued to the employees of PPC's South African businesses. 27% of shares will be issued to PPC's existing strategic black partners and 5% to a newly created trust that will focus on Black women groups in areas where the company operates.  The transaction value of approximately R1.1bn is estimated based on the 30 day volume weighted average price of PPC shares as at Monday 9 July, of R27.39 per share.


Paul Stuiver, CEO of PPC, said: This transaction was structured for the benefit of those parties closest to our business. We were particularly keen for our 2400 South African employees to participate at a significant level and this transaction will result in them owning approximately 7% of the PPC group. An employee trust has been established to hold the employee shares. All permanent employees of PPC in South Africa will participate. A portion of shares has been set aside for new employees joining the company during the next three years.


The SBPs are the same as those which participated in the first phase BBBEE transaction during 2008 being Peu, Nozala, Portland Consortium and Palama Cement Consortium (formerly Capital Edge) who have contributed to the company on a number of fronts during the past four years.  PPC has established the Bafati Investment Trust for the purpose of holding shares for black women groups in the vicinity of its operations. The board of trustees for this trust will comprise a majority of women.  Paul Stuiver commented: This transaction demonstrates our on-going commitment to transformation and broad-based empowerment in the spirit of the Mining Charter. Additionally it will further enhance our BBBEE credentials.


The transaction is being facilitated through notional vendor funding at a fixed rate of 6% over a period of seven years. The estimated facilitation cost to the company is in line with market precedents at 2.05% of the company's market capitalisation. The company will issue new shares at a nominal value of R0.01 (one cent) per share and no capital is required from the participants other than the nominal share value to be paid by the SBPs. The BEE parties will be restricted with regards to disposing or encumbering their shares during the seven year period of the transaction.


During the seven year term of the scheme, all participants will enjoy a trickle dividend of 20% of ordinary dividends, with the balance 80% going towards the NVF structure. After 7 years, participants will be allocated the remaining shares after the notional vendor fund balance has been settled. Additionally they will become entitled to 100% of dividends and be able to trade their shares. The participants will be entitled to exercise all their voting rights over the new shares from the outset.


Paul Stuiver explained:We have put this facilitation structure in place in order to ensure a sustainable transaction that maximises share vesting and value transfer to the BEE participants. PPC will be cancelling 20 million treasury shares prior to implementing this phase of the BBBEE transaction. These shares were purchased by PPC in order to mitigate the potential dilution to shareholders during the first phase of the transaction.


The transaction will also allow PPC to streamline its corporate structure by creating separate South African and international operating entities, thereby aligning the company's structure with its strategy to expand its footprint on the African continent. At the same time the holding company, Pretoria Portland Cement Company Limited will be renamed to PPC Limited. Paul Stuiver concluded: Aligning our corporate structure with our strategy will result in greater efficiency and better risk management. We were unable to do this prior to converting our South African mining rights.


PPC will issue a circular to shareholders during August with further details on the transaction. PPC will publish a notification containing relevant dates and times such as the details of the general meeting at which shareholders will be requested to vote on resolutions relating to implementation of the transaction