Kumba in SA's biggest BEE deal
14 October 2005
South African mining giants Anglo American and Kumba Resources have announced a major black economic empowerment (BEE) deal establishing the country's largest wholly black owned, controlled and managed company, valued at some R16-billion.
The transaction, announced on Thursday, will see the partial separation of Kumba's iron ore assets from its non-iron assets into Kumba Iron Ore, a new company, and Newco, the reconstituted Kumba Resources in terms of the transaction.
The deal will establish Newco as South Africa's flagship empowerment mining company with an enterprise value of R16-billion. Newco will be controlled by broad-based BEE groups via BEE Holdco, a black-controlled company holding 55% of Newco.
The South African Women in Mining Association will have a 17.8% effective and fully funded interest in BEE Holdco.
Newco will be a diversified mining company well positioned strategically and financially to take advantage of growth opportunities in the mining sector in SA, Africa and globally, the companies said.
Anglo American will retain a residual stake in Newco as a demonstration of its long-term commitment to the company. Newco will also acquire the entire issued share capital of Eyesizwe Coal from Eyesizwe Mining and the other shareholders. The shareholders will use most of the cash received to subscribe for shares in BEE Holdco.
Kumba Iron Ore will be listed on the JSE with an enterprise value of some R14-billion which, through unbundling iron ore assets to all existing Kumba Resources shareholders, will hold the majority of Kumba Resources' South African iron ore assets through Sishen Iron Ore Company, with Newco retaining a 20% stake in Sishen.
"This transformational transaction, daring in its boldness and scale, creates two separate, sizeable and sustainable listed empowered companies," said Lazarus Zim, CEO of Anglo American South Africa. "These new entities will be value accretive, breaking new ground in transformation and meeting the needs of stakeholders at every level."
Con Fauconnier, CEO of Kumba Resources, said the deal had been planned for some time.
"Ever since Kumba Resources came into existence, Kumba has been exploring ways of creating a sustainable empowerment transaction reflective of South Africa's demographics," he said. "Today, Kumba has come of age,and through our symbiotic relationship with Eyesizwe we have created South Africa's flagship empowerment company."
The transaction was hailed by Sipho Nkosi, chief executive of Eyesizwe Mining.
"It is creating winners at every level - from the country that hosts the resources to the people that extract them to the communities that benefit," Nkosi said.
"The joining of Kumba and Eyesizwe represents a new force in South African mining: a R16-billion company with an exceptionally broad base of empowerment shareholders and the ideal vehicle to accelerate sectoral growth and development in South Africa."
Pinkie Ncetezo, chairperson of Basadi Ba Kopane, welcomed the significant element of participation by women's groups in the transaction.
"True transformation and broad-based empowerment addresses gender issues and community participation and we are confident that as partners going forward these two vital attributes will be achieved," Ncetezo said. "We have the right calibre of women's groupings in this transaction to hold the torch for other women to follow."
The deals are subject to the completion of satisfactory due diligence reviews, the requisite legal and funding agreements, regulatory and shareholder approval.