MTN chief's windfall

2010-11-28 15:11

Johannesburg - Outgoing MTN Group [JSE:MTN] CEO Phuthuma Nhleko may have secured himself hundreds of millions, thanks to his participation in the company's black economic empowerment (BEE) share offer.

The Zakhele BEE share scheme offer had been more than 1.7 times oversubscribed and applicants could not get all the shares they had applied for.

About a week ago Nhleko also became R400m richer after selling 3.2m shares at the market price.

According to MTN, this deal was done partly because of commitments following a transaction with a commercial bank.

But Nhleko is not the only one benefiting greatly from the Zakhele offer.

Cyril Ramaphosa’s Shanduka Group received more than 11% of the shares on offer.

MTN had offered the public 80.9m shares at R20/share.

On Friday the company's share price closed at R125.50.

Zakhele shares are not currently freely available on the market. When they are, the just over 2m shares (2.5% of the offer) that Nhleko and his wife bought at the current price will be worth R250m - netting a profit of more than R200m.

Nhleko bought the shares at R20 each for a total price of R40.2m.

Shanduka’s 9.3m shares (bought for R187m) will then be worth R1.16bn - netting a profit of almost a billion rand should the current share price remain at this level.

According to MTN the offer had raised some R2.8bn for the company.

The 1.7 times oversubscription meant that about 137.5m Zakhele shares had been applied for.

MTN said that all black employees and directors had been entitled to participate in the scheme. The directors had been able to buy the shares at the same price as the public could.

Apart from Shanduka and Nhleko, other MTN directors together bought 760 000 of the 80.9m shares.

According to MTN, more than 98% of the applications had been from individuals, 94% of whom had received all the shares they applied for.

Kaplan Equity Analysts expert Irnest Kaplan explained that companies generally applied a formula when an offer was oversubscribed.

One might wonder whether the formula had been equitably applied, he said. Someone might, for example, have applied for 200 shares and received only 100.

According to the same formula someone might have applied for 10m shares and received only a million. So, he asked, had the formula been fairly applied?

  • Carl Muller - 2010-11-28 16:09

    Why are directors allowed to buy shares like this. It smacks like insider training....

  • Thabo M - 2010-11-28 16:23

    It is not Empowerment if a someone like Phuthuma Nhleko is the beneficiary, it is Enrichment.

  • Lynne - 2010-11-28 16:41

    Isn't insider trading illegal? I am speechless at the daylight robbery that is carried out by these fat cats, will it never end!

  • Blikkies - 2010-11-28 16:43

    Rediculous- Top story alongside reads "whites still dominate asset ownership"...big surprise, the BEE offer is taken up and sold on to whichever investor in the market chooses to pay full market value- what is the purpose of these offers if those allowed to take it up- black people- are then allowed to sell them straight back to the market for a fat profit. Then next year the company is in the same position with too many white owners?? and i take it needing to find a new BEE offer to comply- absolutely rediculous, what a sad waste of money and opportunity. In principle i do not object to the offer, but how about the GVT caretaking the rights for real poor people and communities? Instead, rich black fat cats get richer and the poor masses get nothing- does Cyril Ramaphosa seriously need more handouts?

  • Steve - 2010-11-28 16:54


  • Ron - 2010-11-28 17:35

    It seems that the Black Economic Empowerment(ENRICHMENT) keeps on landing in the hands of the same chosen few. I am a small bussinessman that started with R1-80 and built it into a sustainable and rapidly growing industry within 2 years. Despite being refused assistance by all private and Govt agencies I still managed and grew through sheer hard work. When I read stories like the above, my first reaction is anger as the people that BEE was meant for are still mostly rooting around for the scraps.

  • Rob - 2010-11-29 07:40

    The writer has absolutely no idea how this share offer works. Nhleko bought Zakhele shares for R20, NOT MTN shares. Quote from the Zakhele share offer prospectus: "DOES THIS MEAN THAT MY MTN ZAKHELE SHARE IS ALMOST EQUIVALENT TO AN MTN SHARE? Whilst the number of MTN Shares for every MTN Zakhele Shares is almost 1:1, in the event of the liquidation of MTN Zakhele, and based on the MTN Share price of R116. 50 at the Last Practicable Date, MTN Zakhele would need to sell 18, 540,772 MTN Shares at R116. 50 to pay off the amounts owing to the BFC Investors ( funders) of R2,160 million (excluding break costs) and would need to sell 27, 591,762 MTN Shares with a price of R116. 50 to settle MTN’s Notional Vendor Finance (R3,214 million), leaving 29, 227,322 MTN Shares for distribution to the MTN Zakhele shareholders (i.e. you). This distribution would be 36. 1277 MTN Shares for every 100 MTN Zakhele Shares held. This equates to an immediate liquidation value (excluding liquidation costs and any taxes payable) of R42.09 per MTN Zakhele Share." So no, they are not worth anything close to R125 each. If you are going to write an article for a finance website, surely you at least do SOME research...

  • reality check - 2010-11-29 08:25

    - This is why the so called BBBEE concept is an absolute farce. You can bet your bottom Dollar that the share allocation went predominantly to the elite and connected of the black community. There is nothing broad based about it and serves only to enrich the already wealthy.

  • The Trutherizer - 2010-11-29 11:16

    Doesn't this go against the spirit of BEE? The point is surely not to make the rich richer, but to more fairly distribute the wealth of the country. I am actually disgusted by this. Somebody with an odd R40mil to spare should not have had access to this deal. Or there should have been a cap on the number of shares any single person can buy. And now a few months later he has made more than 500% profit on R40mil! Something has gone seriously amiss here... Or am I missing something?

  • mike - 2010-11-29 11:41

    simply put,how the hell can it be justified that the outgoing ceo of a company he is supposed to be RUNNING can enrich himself by even being ALLOWED to buy shares in said companies b.b.e offering,um.... in his capacity he had acccess to valuable inside info? conflict of interest?noooo,of course not...what a joke..

  • Gatvol - 2010-11-29 11:54

    Just to think that some of us whom applied for these shares were declined while these FATCATS get more fat! Thief indeed. I thought allocation was from minimum to largest depending on availability

  • Moya - 2010-11-29 12:04

    What happened to Robin Hood? These BBBEE guys are robing the poor to pay the rich. I agree with Steve. Thief!!

  • peanuts - 2010-11-29 13:00

    fin24, your reporting is really poor. there are numerous mistakes in your reporting but most importantly, look at the deal carefully. cyril ramaphosa (as chairman) got R187m worth, presuming he owns 20% of shanduka, it means shanduka got R935m of shares. the deal would not have been oversubscribed if it was not for shanduka. how did shanduka manage to raise that sort of cash for the deal?

  • Fred - 2010-11-29 15:17

    @Rob. Good highlighting the error in the reporting. Edward-John Bottomley pls check your facts before writing your articles. And to the editor that signed off this article, shame on you! The prospectus is very explicit about the mechanics of the deal. Now everyone is commenting on a factually incorrect article, stoking unnecessary fires...

  • Cameron Briceland - 2010-11-29 15:54

    The fact that only blacks are allowed to buy these shares is pure anti-white hatred.....deny it.

  • AJ @ Rob - 2010-11-30 09:04

    Appreciate the facts, but it does not change what has happened. Some due with a few hundred million already get his full alotment to make another few hundred million for no work.

  • Amani - 2010-11-30 09:13

    This is BEOE: Black Economic Over-Empowerment I thought the aim was to distribute; all I see is centralisation of the wealth!

  • Nebkad - 2010-11-30 12:10

    If I recall well, the deal was for black persons and groups (read: Stokvels). Now is the Shanduka company a Stokvel or a person? If people who applied for more than 1250 will get only a percentage above 1250, just how many shares did Phuthuma (to get 2.5%) and Shanduka (to get 11%) apply for?

  • rob - 2010-11-30 14:04

    Wow. what a great new way to spell UNETHICAL.

  • Country Girl - 2010-11-30 16:12

    Totally disgusting that someone can earn so much money from that. BEE my foot - its just anothe word for rip-off!!

  • Sello ( Lament) - 2010-11-30 17:19

    I cannot believe that the companies still allow their top guns to benefit on these schemes. We saw this with Sasol and it continues to happen, whilst at the same time it is called empowerment. As an African who believes in capitalism, to see Ubuntu being overtaken by crass materialims is a day of shame. Surely executives guys were already holding options and restricted shares; why in the allotment are those not allocated the least defeats the purpose of calling this empowerment.

  • Andrew - 2010-12-02 02:00

    @Fred: The only facts here are another BEE deal and another one of the richest black people in the country getting richer. It does not matter how it happens but these racist schemes are set up mainly for the benefit of a few black people. The ANC is taking this country to hell in a handbasket. No wait, we are already there ever since 1994.

  • GUSTAV - 2010-12-03 07:10

    I am absolutely disgusted at this daylight robbery. I really thought that this will be a deal structured to empower the poor like myself. Even their advertisements gave us that impression. I sold my mini-bus to obtain financing to take part in this deal because i really thought it was a good opportunity. i got my letter from mtn yesterday only to find out that i didn't receive all the shares i applied for. Then i read the article and saw tha super-rich guys like ramaphosa and nhleko received their full allocation of millions of shares. WOW!!!! CAN MTN PLEASE EXPLAIN THIS TO ME??? CAN ANYONE PLEASE EXPLAIN THIS TO ME??? IS THIS EMPOWERMENT OF THE POOR OR FURTHER ENRICHMENT OF THE RICH?? THIS IS HIGHWAY ROBBERY! MTN MUST BE EXPOSED FOR THIS! THIS IS RUBBISH TO SAY THE LEAST! I AM REALLY DISGUSTED! WE MUST TAKE THIS STORY TO THE MEDIA SO THAT EVERYONE CAN KNOW WHAT MTN IS ALL ABOUT!!!!

  • gustav - 2010-12-03 07:51

    this is highway robbery to say the least. i applied for a few shares and didn't get everything. these rich fatcats apply for millions and get everything. mtn should explain this and they should be ashamed of themselves.

  • Carl Muller - 2011-02-04 09:57

    I ported my number to MTN last Sunday. Their service is horrendous. Presently both my old and new sim cards are dead. I tried for 20 minutes to speak to someone. Ridiculous.

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