Media

Tsebo strengthens gender ratio

City Press - Malose Monama

27 January 2008

WOMEN empowerment group Nozala has managed to hold on to a share of outsourcing and facilities management company Tsebo Outsourcing. Despite having to sell its original stake in Tsebo after private equity partner Ethos exited the investment, triggering the “Come Along” clause which governs the relations between the companies forming the agreement, Nozala teamed up with another BEE outfit, Lereko, to take up 30% equity in Tsebo. Following an open-market process in which a local conglomerate and two international trade buyers were among those vying for Tsebo, the owner of Fedics, Drake & Scull and Invalu, the Nozala-Lereko partnership with Absa Capital emerged victorious. In terms of the new arrangement, Absa Capital holds 49.9% of Tsebo. The remaining 50.1% shareholding will see Tsebo’s management increase their stake to 20%, with Nozala and Lereko acquiring a 30% shareholding, split equally. The other 0.1% will be held in a trust for future allocation.

Nozala is the empowerment vehicle of prominent women such as Salukazi Dakile-Hlongwane, Dawn Mokhobo and Lorato Phalatse.Lereko’s principals are former North West premier Popo Molefe, ex-cabinet minister Valli Moosa and businesswoman Lulu Gwagwa. The parties to the new deal would not discuss the valuation, with Nozala chief executive Lerato Mashologu saying only that involvement in the new deal was a result of continuing excellent relations with management, “developed through a track record of active involvement in Tsebo and value added to management through leveraging our networks to bring in contracts and grow the business”. Mashologu said Nozala had used proceeds of the initial deal to liquidate debt and to improve cash flow, but said the current deal was being financed as a new and separate one.“We are financing through a bridge facility from Absa Capital and are also in the process of finalising alternative funding,” she said. She said the deal enhanced Tsebo’s empowerment credentials, as the overall BEE shareholding had been increased. Tsebo chief executive Clive Smith said his management was happy to have Nozala continue as a shareholder. “The offer process included a series of potential investors ranging from local and international trade buyers, to empowerment investors and financial investors.

“From a company perspective a new private equity player allows Tsebo to remain a truly South African com pany, following its strategy and growing with the economy for the benefit of all stakeholders.” Smith believes their track record is proof that empowerment linked with private equity works. “Our partnership with Ethos Private Equity and Nozala Investments afforded us the space and flexibility to concentrate on developing new contracts and markets through our vast network. New empowerment partner Lereko Investments’ industry knowledge and expertise will enable us to continue with our growth strategy.” Gwagwa, Lereko’s chief operating officer, said they had chosen to invest in Tsebo for two main reasons:

“Tsebo is an established empowerment company, a pathfinder on transformation. So we do not expect to have any issues on that front. They are also a growing business operating in a growing market.” She said many large corporations and public sector entities with whom Lereko had established relationships were outsourcing noncore functions such as facilities management, which they should be able to leverage. Tsebo generates an annual turnover of R2 billion and employs 10 500 people. André Pieterse, head of equity investments at Absa Capital, said they were pleased to invest in a winning company with a winning culture. “Tsebo has shown strong growth and cash generation in recent years and we believe that this will continue. “Through substantial growth in turnover, Tsebo has created value for both empowerment and equity partners. This transaction will allow it the opportunity to continue realising its strategic initiatives,” said Pieterse.

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