SABMiller in R6bn empowerment deal

2 July 2009

Global brewing giant SABMiller has unveiled a black economic empowerment (BEE) deal that will see approximately 10% in South African Breweries, worth approximately US$750-million (about R6-billion), being transferred to its employees and other participants.

These include black-owned licensed liquor retailers and liquor licence applicants, as well as black-owned customers of Amalgamated Beverage Industries (ABI), the soft drinks division of South African Breweries (SAB), and the broader South African community through the SAB Foundation.

“We have structured this transaction to maximise benefits for all our stakeholders and to deliver genuine broad-based black economic empowerment (BEE),” SABMiller CEO Graham Mackay said in a statement this week.

At the end of the 10-year transaction period, participants will exchange their shareholdings in SAB for shares in parent company SABMiller. SABMiller, listed in London, was formed in 2002 when SAB acquired US-based Miller, and is now one of the largest brewers in the world.

Qualifying participants

The employee offer will include, through an employee trust, all black permanent employees of SAB, its subsidiaries and the SABMiller group who are permanently resident in South Africa. It will also include those permanent white employees who are not normally eligible for participation in the SABMiller group share incentive plans.

Retailer participants will be required to be a qualifying black person or a greater than 51% black-owned entity, as defined in terms of the country’s Codes of Good Practice on BEE, in order to participate in the offer.

The focus of the SAB Foundation will be to engage in community initiatives that provide benefits to historically disadvantaged South Africans, with a priority on women and the youth, particularly in rural areas. It will particularly support entrepreneurship development, which the company believes will deliver broader economic benefits for the country.

The BEE deal will not require any external bank funding, and will require only a small cash investment by licensed liquor retailers, liquor licence applicants and customers of ABI.

“A meaningful dividend stream is expected to be paid to all participants for the whole of the 10-year transaction period, thereby delivering a significant economic benefit from the first year,” Mackay said.

Empowerment compliance

The deal will materially enhance SAB’s compliance with BEE codes and, in addition, seeks to support the normalisation of the South African liquor industry by supporting liquor licensing in South Africa. The cost of the deal to SABMiller is approximately $220-million (about R1.8-billion).

By seeking to promote sustainable economic growth and social development in South Africa, SABMiller says the deal will align the interests of the group’s South African stakeholders with its shareholders, and will maximise long-term shareholder value.

“We were determined to design a transaction that would deliver truly broad-based and tangible benefits, and we believe this transaction will do that from the beginning,” said SAB managing director Norman Adami. “This deal is good for South Africa and good for SAB.”

SAinfo reporter

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