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Merrill hails Imperial’s BEE deal

Media coverage : Business Day

2005/04/19
Larry Claasen

GLOBAL investment house Merrill Lynch has endorsed transport and logistics group Imperial’s R1,4bn empowerment deal, which saw Lereko Mobility take a 7,25% holding in Imperial earlier this month.Merrill Lynch said in a report that according to its calculations, Imperial shareholders’ forward earnings will not be diluted as a result of the deal. The deal is positive for Imperial as it enhances the group’s black economic empowerment credibility at no cost to its income statement, the investment house said.

Lereko Mobility, formed in July last year, consists of Lereko Consortium, which holds 51% of the empowerment stake, with Imperial holding the remaining 49%. Lereko Consortium is made up of Lereko Investments as well as community and women’s groups. This deal follows the R1,3bn empowerment deal done with Ukhamba Holdings, which took a 10,1% holding in Imperial in December 2003. Imperial holds 49,9% of Ukhamba while historically disadvantaged staff owned the remaining 50,1%.

Merrill Lynch said Imperial’s empowerment holding effectively stands at 8,3%. It said the objectives of the empowerment partners were largely in line with each other.  Lereko Mobility wants a strong share price in 2010 and in 2015 when it has to settle its debts, whereas Ukhamba needs strong earnings growth and a “depressed” share price to maximise its share conversion between 2005 and 2011.  The latest deal sees Imperial issuing 14,5-million new preferred ordinary shares to Lereko Mobility.

At the same time Imperial will buy back 14,5-million ordinary shares at R96,85 each from its shareholders, which it will cancel. Lereko Mobility will pay R2m for its stake and will finance the rest by issuing debentures to Imperial shareholders for a total consideration of R458m, at R31,52 a debenture. Imperial closed down 19c at R101 with 476616 shares traded yesterday.

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