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Epochal deal gives blacks big stake in SA mining
The African Mining Group adds the finishing touches to its JCI claim, writes THABO KOBOKOANE
Mzi Khumalo's Capital Alliance-led Africa Mining Group completed the acquisition of a 34.9% stake in JCI for R2.8-billion. The deal sets the scene for a bid by the consortium's to buy Anglo's remaining 12.7% stake in the mining house, giving it unfettered control of JCI. AMG has been given the right of first refusal to the stake for a period of five year. The JCI board will be reconstituted in March and Khumalo appointed as chairman. "We've complied with all of Anglo's conditions and the deal is done," Khumalo said. The deal was struck in the late hours of Friday a full week ahead of the February 28 deadline. Khumalo outlined the broad details of the deal, namely that Saflife, the listed life assurance company which controls 25.9% of Capital Alliance Holdings, will be the vehicle through which the deal is done. Saflife will raise R1.4-billion of the money while other funds have been secured from institutions believed to be Investec, SBC Warburg and Standard Corporate Merchant Bank are underwriting the remaining amount. This is ostensibly to give smaller members of the AMG the opportunity to participate. Further details of the transaction will be released tomorrow. Saflife will soon announce details of a rights issue of additional shares soon to finance the transaction. The deal, the second largest empowerment deal ever following the National Empowerment Consortium's acquisition of a 35% stake in Johnnic for R3-billion, heralds the entry of black business to the mining industry. JCI is South Africa's sixth-largest mining house and controls three gold mines, HJ Joel, Western Areas, and Randfontein - the latter two considered among the most profitable in the country. The acquisition effectively increases the market capitalisation of black controlled or managed companies on the JSE to about R30-billion, based on Friday's trading prices - slightly over 3% of the JSE's total capitalisation. And taking into account Johnnic's interests in other listed entities, this figure is close to 11% of the JSE's market capitalisation. The deal sets the stage for the AMG to exercise its option to buy the remaining 12.7% Anglo stake in JCI, which is housed in De Beers, Anglo's sister company. The 12.7% would increase AMG's stake in JCI to 47.6%. Khumalo this week confirmed AMG was talking to Anglo on the 12.7%, but said these negotiations were separate from the initial tranche of 34,9%. The 12.7% stake would give AMG "unfettered control" over the JCI business, but it would require approval from the JSE's Securities Regulation Panel in order to exempt the AMG from making an offer to minorities. The SRP granted this in the Johnnic deal. The deal did not come easily and Reuel Khoza, chairman of AMG, said in an interview with Reuters this week there had been problems raising the finance. "We have been talking to a number of institutions. Some are positive, others don't see their way clear. And we cannot at this stage say which are which," Khoza said. The financing problems were compounded by the high premium Khumalo and AMG agreed to pay Anglo American. Last year AMG and Anglo announced that the consortium would buy 34.9% of JCI at R54.50, outbidding a group led by Cyril Ramaphosa's New Africa Investment by 50c a share. The AMG price was a 17% premium on the closing price of R49 when the deal was struck. Since then the gold price and JCI's share have moved down, although JCI picked up steam this week. Thebe Investments pulled out of the AMG last month, leading to speculation that the consortium would struggle to raise the finance. Capital Alliance issued a rights issue offer two weeks ago, leading to speculation that AMG was unable to raise the money. A reticent Khumalo denied this was the case, but admitted AMG was talking to Anglo about the remaining 12.7% stake. The premium - which increased with the declining JCI share price - was certainly too high for smaller AMG members. The AMG is made up of Capital Alliance Holdings, Reuel Khoza's Co-ordinated Network Investments, African Renaissance, Corridor Development Corporation, Khotso Investment, Northern Corporate Investment and Women's Development Bank Investments Holdings, headed by deputy president Thabo Mbeki's wife Zanele.
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GRAPHS