Media

Sappi, Lereko in R224m land deal

Business Report

April 20, 2006
Margie Inggs

Durban - Sappi, the global pulp and paper group, would sell an undivided 25 percent stake of its South African plantation land portfolio to empowerment group Lereko Property Consortium for R224 million, the group announced yesterday. Lereko has been given the go-ahead to look at all Sappi's land with a view to its property development potential. Sappi owns over 360 000ha of plantation land across its commercial operations. Its land-holdings, excluding the value of standing timber, have a market value of about R900 million.

"A portion of this land is under-utilised and an opportunity has been identified to partner with the empowerment consortium to develop certain areas of the land for mutual economic benefit," said Andre Wagenaar, Sappi's Southern Africa's chief executive. In Mondi's empowerment deal of its newsprint business, Anglo, Mondi's parent, sold 42 percent of the newsprint business to MCI Resources to form Mondi Newsprint Business (MNB). Valued at R1.1 billion, MNB comprises just over 10 percent of Mondi South Africa's total business. The investment gave MCI Resources joint ownership of two of the three newsprint machines in the country, as well as an interest in Mondi's substantial forests.

The consortium that bought a share of Sappi's forests is led by Lereko Investments, which has a 46 percent stake in the consortium and is headed by Valli Moosa and Popo Molefe.  The consortium will include a 30 percent stake by Sappi employees through a Workers' Trust and a 10 percent stake by the Malibongwe Women's Development, a non-profit organisation focusing on the upliftment of women in South Africa. The balance is held by merchant bankers AMB Capital.  Commenting on the transaction, Wagenaar said: "Lereko, our empowerment partner, has the right credentials and expertise for a long-term relationship and to take charge of the process to develop the land to our mutual benefit.

Speaking on behalf of the consortium, Moosa said: "The land acquired has multifaceted uses and our objective is to identify and implement property development initiatives across non-plantation areas of land. Proper development will allow for job creation and interaction with local communities." Meanwhile, Sappi's long-term domestic currency rating of A and short- term rating of A1 were yesterday reaffirmed by international credit rating agency Global Credit Ratings (GCR), although they were placed on rating watch. Jackie Swan, a senior analyst at GCR, said Sappi's ratings had been placed on rating watch because it operated in a difficult industry and had nothing to do with former chief executive Jonathan Leslie's resignation.

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