Cape Town - There was no cynicism or deviousness about SABMiller's [JSE:SAB] broad-based black economic empowerment (BBBEE) transaction, which was approved by shareholders at a meeting in London on Wednesday.
This was the view of group chairperson Meyer Kahn, who was responding to questions raised by shareholder activist Theo Botha at the shareholders' meeting.
Kahn argued if the BBBEE scheme did not work to the benefit of all its participants, it would have failed SAB Limited as well SABMiller plc.
"So there is no cynicism or deviousness about this. We want the participants to benefit enormously on the basis that they are our family in the beer business in South Africa."
Kahn stressed that if BBBEE participants benefited substantially over the next 10 years, there was no reason why SABMiller plc shareholders would not benefit enormously in line with empowerment shareholders.
"This [the BBBEE deal] is done in good faith. It's been well researched. It's an exciting venture. It's the first time in South Africa that many hundreds of thousands of people could benefit from our efforts in the beer business."
Botha asked whether the valuation of the BBBEE transaction - worth about R7.3bn - was fair and reasonable, based on "the limited information provided" in the circular to shareholders.
SABMiller CFO Malcolm Wyman pointed out there was an issue price and also a sale price which were set in terms of a formula.
"Therefore you need to look at both of those in determining the fair and reasonable nature of the scheme."
Wyman believed SABMiller had set a consistent methodology to determine the (earnings) multiple and that this represented fair value to both SABMiller and the participants in the BBBEE deal.
Different multiples
But Botha argued SABMiller was valuing the BBBEE transaction based on the multiple of SABMiller. He asked: "Surely when new shareholders are coming in and they are buying a minority stake in SAB South Africa - surely that multiple should be a lot lower than the multiple we are using for SABMiller?"
Wyman refuted this. "I don't think you can make that statement off-hand, because it depends upon the outlook for each of the companies over a ten-year period between the acquisition and the sale."
Wyman also pointed out that when a shareholder bought shares on the market, that shareholder would not know what the multiple would be when the shares were sold in future.
"This is in fact a very transparent way for shareholders coming in at the moment to understand how the shares are being priced when they get the shares, and how the shares are being priced when they sell the shares."
Botha also wanted to know why it took SABMiller so long to pitch an empowerment transaction - noting that some listed companies had gone through two or three BEE transactions already and that SABMiller derived a substantial portion of its profits from black consumers in SA.
Kahn said the concept of black economic empowerment had been under examination by a host of commentators, not all of whom had been happy with the way that BEE has been implemented in the past 10 years.
He added that the structures that many companies used for BEE had placed the participants under the water.
"I am delighted to tell you that the structure we eventually implemented, after years of research and consultation, requires no outside finance, no risks to its participants and immediate enhancement by virtue of the fact that they will receive dividends from year one. So rather late than never, but correctly so."
Kahn reckoned SABMiller's empowerment scheme was superb. "Most impartial observers have said that this is the broad -based black economic empowerment scheme that South Africa needs to apply into the future".
- Fin24.com