Sasol to sell 10% of shares to black investors

Sasol, the world's largest fuel-from-coal company, will sell 10 per cent of its shares to black investors in a deal valued at R25.9bn ($3.2bn), the South African group said on Tuesday.

The transaction is the largest black economic empowerment deal in South African history.

BEE, a signature policy of the South African government since the African National Congress came to power in 1994, is an attempt to vest a greater share of the economy in the hands of the black majority after their systematic exclusion from commerce during the five decades of apartheid.

A total of 63.1m new shares will be offered to black citizens, black-owned investment groups, Sasol employees and a corporate foundation focused on developing maths and science skills among black students.

The dilutive impact of the new shares will be offset by Sasol's buyback of 6 per cent of its shares before the deal, said Christine Ramon, finance director.

The deal includes a novel offer of 3 per cent of the company to the "black public". Under a special scheme, citizens can buy full voting shares with a down payment of only 10 per cent of the shares' purchase price. They can repay the remainder over 10 years through dividend payments and the appreciation of the share price, making the scheme more of a grant than a loan.

The deal comes soon after the BEE codes became enforced. From 2008, the government will award licences and contracts to companies based on their BEE "score" which measures their compliance with empowerment principles through factors such as the percentage of share ownership nominally in black hands.

In the past two years, many of South Africa's blue-chip companies have announced huge BEE transactions, including Impala Platinum's R16bn deal with the Royal Bafokeng nation.

Debate about the BEE policy has intensified as deal sizes have become larger. Critics alleged that companies approach BEE codes with an elaborate "box-ticking" exercise that results in little real empowerment. A long-standing criticism is that a handful of black billionaires benefits most from BEE transactions.

Sasol's BEE deal will take 10 years to complete, said Ms Ramon. That is the amount of time it will take to vest fully the new shares with their black owners.

Sasol, a former industrial champion of the apartheid era, has evolved into one of the world's leading petrochemical companies, taking advantage of soaring demand for fuel-from-coal technologies in China and the US in the current high oil price environment.

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