DealMakers - 2024 Annual
BEE Deal of the Year
Coronation Fund Managers’ B-BBEE deal with the Imbewu and Ho Jala Trusts
In October 2024, Coronation announced the disposal of a further 9.7% stake in the company to the Imbewu Trust, Coronation’s employee share ownership plan (ESOP), and the Ho Jala Trust, a broad-based ownership scheme (BBOS), for a transaction value (at the time of the announcement) of R1,47bn. The deal lifted the asset manager’s level of effective black ownership to 51%.
Prior to the announcement, Coronation was 31% black-owned, with R278bn (42% of total assets under management) managed by black employees.
Coronation’s South African-based employees are 64% Black, of which 57% are black women.
Coronation’s total assets under management increased 11% to R667bn in the 2024 financial year, which it said was due to strong market returns and continued outperformance.
A total of 30,4 million new Coronation shares were issued (at a nominal subscription consideration of R0.0001 per share) to the ESOP trust – equivalent to 7.84% of its issued share capital – with a market value of R1,2bn. A total of 7,2 million shares were issued to the BBOS, equivalent to 1.86% of Coronation’s issued share capital, valued at R287m. The shares were issued in December 2024, and the total economic cost of the deal is estimated at approximately R300m over a 10-year period.
The shares will be subject to a notional funding arrangement for the duration of 10 years, priced at 85% of prime. Beneficiaries of the trusts will receive a trickle dividend allowance – 10% of the cash distributions, with the remaining 90% used to reduce the notional funding balance.
For some time, there has been increasing pressure from both government and the private sector to invest funds with asset managers that have a BEE shareholding of more than 51%. In the absence of improving its black ownership, the Board believed that the drive by capital allocators could place a meaningful portion of Coronation’s assets under management at risk in the future.
Coronation had already experienced outflows and had been unsuccessful in several tenders because of its BEE status. According to Coronation Fund Managers’ CEO Anton Pillay, without the required ownership level, Coronation would come under increased pressure to maintain its current assets under management, and its ability to attract additional assets in South Africa would be limited, which would affect its market share and result in the possible erosion of shareholder value.
In addition, the asset manager was unable to participate in industry surveys geared toward asset managers with majority black ownership, and this excluded it from participating in certain client mandates.
The transaction allows Coronation to enhance its competitive position, capitalise on growth opportunities requiring high black ownership, and maintain its market share. More asset management mandates will improve dividends over the long term, effectively paying off the funding balance. In addition, it aligns with Coronation’s goal of achieving substantial and sustainable transformation for the benefit of its stakeholders, the financial services industry and the wider community.
In December the group announced that it had met all the necessary conditions for the proposed B-BBEE transaction and that new shares were issued to the BEE trusts. The successful completion of the transaction means the group now exceeds the regulatory requirements for transformation in the financial services sector while also driving meaningful change for its employees, shareholders, and communities.
Local Advisers
Nedbank CIB, Black Lite, Cliffe Dekker Hofmeyr, KPMG, BDO and Kim Bromfield IFRS Advisory Services.
Comment from the Independent Panel:
This was a significant and important transaction in the financial services industry, as it increased Coronation’s BEE shareholding to 51%, a key factor for the panel.
BEE Pick of the best in no particular order
Ascension’s acquisition of a 59% stake in Consumer Profile Bureau
In July 2024, Ascension Capital Partners – a South African, majority black-owned private equity fund manager – started the process to acquire an additional 59% stake in Consumer Profile Bureau (CPB), increasing the black ownership to 85%. The stake was acquired from international private equity firm, One Thousand and One Voices (1K1V).
In August 2023, Ascension Private Equity Fund I (APEF 1) first acquired 26% of the equity in CPB, investing alongside 1K1V – a private family capital fund, backed exclusively by families from around the globe. Ascension (with R1,8bn in assets under management) manages APEF 1, which is currently funded by local institutional capital.
CEO Kabelo Moja says Ascension’s investment thesis is to invest in innovative businesses that serve or enhance a basic human need, with a technology element - CPB meets this investment thesis.
Established in 1981 and registered under South Africa’s National Credit Act, CPB provides services which include tracing, credit verification and debtor profiling, in addition to offering real-time credit solutions to a diverse client base, encompassing reporting and analytics, digital identification, paperless FICA and online data analytics.
Marina Short, CPB’s CEO has spent the last 14 years building a diverse client portfolio. Together with CIO Alain Craven, they form a powerful partnership that leverages their combined 40 years of industry expertise and market insight, driven by a shared ambition to propel CPB’s growth and innovation, ensuring a solid foundation for future success.
There are a total of 18 credit bureaus in South Africa as represented by the Credit Bureau Association. Of the 18, only five are fully licensed member entities, and CPB is one of only two locally-owned, fully licensed credit bureaus within this competitive landscape of large international players.
The deal – a pure equity transaction with no associated debt funding the acquisition – is transformational for the industry, marking the creation of a black-owned South African credit bureau. The 85% black ownership gives CPB the competitive edge to grow market share against its international peers.
CPB recently signed a Memorandum of Understanding with the Department of Justice to access data related to child maintenance defaulters, to supply this information to other credit bureaus and credit providers, impacting offenders’ ability to access credit and underscoring their commitment to children’s rights.
Society is also set to benefit from CPB’s ability to trace the recipients of unclaimed pension benefits – a significant problem in South Africa, with over R48bn in unclaimed benefits owed to over 4,5 million South Africans.
The transaction negotiations and process were concluded timeously, with transaction agreements signed in October and Competition Commission approval received in November 2024.
The deal – a pure equity transaction with no associated debt funding the acquisition – is transformational for the industry, marking the creation of a black-owned South African credit bureau. The 85% black ownership gives CPB the competitive edge to grow market share against its international peers.
CPB recently signed a Memorandum of Understanding with the Department of Justice to access data related to child maintenance defaulters, to supply this information to other credit bureaus and credit providers, impacting offenders’ ability to access credit and underscoring their commitment to children’s rights.
Society is also set to benefit from CPB’s ability to trace the recipients of unclaimed pension benefits – a significant problem in South Africa, with over R48bn in unclaimed benefits owed to over 4,5 million South Africans.
The transaction negotiations and process were concluded timeously, with transaction agreements signed in October and Competition Commission approval received in November 2024.
Local Advisers
Pallidus Capital, Lumen Legal and Werksmans.
Kabelo Moja
Marina Short
Comment from the Independent Panel: The panel noted the creation of an 85% black-owned South African credit bureau with no associated debt funding the acquisition.
Air Liquide Large Industries South Africa’s B-BBEE transaction with CIH
In July 2020, during the COVID-19 pandemic, Sasol announced that it was to dispose of its Air Separation Unit (ASU) business, consisting of 16 ASUs in Secunda, to French multinational Air Liquide for R8,5bn.
Air Liquide – an international supplier of industrial gases – has been operating in South Africa for over 60 years, supplying various customers utilising different supply channels. Air Liquide Large Industries South Africa (ALLISA), a company formed for the purpose of the Sasol transaction, is dedicated almost entirely to the supply of gases to Sasol and has been operating the ASUs within the framework of a long-term supply contract since June 2021.
Nicolas Poirot CEO Africa Middle-East & India at Air Liquide said “these long-term contracts will actively support the development of renewable energy in South Africa, for the benefit of the country’s electrical system and ultimately of the South African society in the context of a Just Transition.”
In March 2024, in line with the timeframe and public interest conditions stipulated by the Competition Tribunal at the time of the Sasol disposal, ALLISA sold a 25% stake in the company to Community Investment Holdings (CIH), a 100% black-owned, women-led investment holding company.
Established in 1995, CIH is a South African local investment holding company with business interests in sectors ranging from financial services, logistics, mining, power and energy, and healthcare. CIH is also in partnership with the South African subsidiaries of Air Liquide Healthcare and VitalAire.
The BEE deal was facilitated, in part, through a structured financing solution and cash provided by CIH.
The ASUs – with an installed capacity of 42,000 tonnes per day – represent one of the world’s largest oxygen production sites, supplying industrial gases, specialty gases and related services to the steel, automotive and fabrication, food and beverage, mining, petrochemical, pharmaceutical and glass industry customers.
The Air Liquide/Sasol transaction, together with the B-BBEE component, is a key milestone for all participants contributing meaningfully to the economy and environmentally sustainable practices. Through a multi-year investment and modernisation plan, and a steep increase of the site’s procurement of renewable energies, Air Liquide plans to reduce the CO2 emissions (Scope 2) arising from the 16 oxygen production units it acquired from Sasol by 30% to 40% by 2031.
Comment from the Independent Panel: The panel liked the direct shareholding by black women of the ASUs acquired from Sasol.
Local Advisers
Pallidus Capital, Lumen Legal and Werksmans.