BEE deal promises to be good for Spar
July 17, 2009
By Florence de Vries
The Spar group's issue of 10 percent equity to broad-based black economic empowerment (BEE) trusts will increase loyalty with its franchise operators, retail analysts agree.
Spar's proposal will see 18.9 million redeemable, convertible preference shares, with a par value of 0.06c a share, issued to employees and retailer employees.
Forty percent of these new preference shares will be allocated to Spar's 2 700 employees (excluding senior management) with the remaining 60 percent allocated to the 25 000 retailer member employees.
In terms of the scheme, shares will be issued to employees on service-based criteria.
The shares will be held in trusts for employees and issued to the trusts at the 30-day volume-weighted average price.
This price is at a 5.7 percent discount to the current Spar share price. The shares added 1.1 percent to close at R59.30.
Of the 1 508 stores in the Spar group, 132 are black-owned.
Spar chief executive Wayne Hook said this was the group's first step and it had not made any decisions regarding the Department of Trade and Industry's scorecard for strategic joint ventures or partnerships of 25 percent plus one vote. "All we know is we've got the right parties involved and we're going to monitor this deal and see where it goes from there."
The deal will be financed through the creation of two trusts - one for Spar employees and one for individual owners of its franchise stores - which will be funded by the Spar group itself.
Syd Vianello, an equity analyst from Nedcor Securities, said yesterday that Spar's move was pre-emptive since pressure would soon mount for the retail sector to pull up its socks as black economic empowerment deals had been lacking in this industry for some time.
He said this form of economic empowerment had not yet hit home with other major retailers as these deals did not necessarily give members the opportunity to make money with the group.
Paul Bosman, a retail analyst from PSG Tanzanite, said that, in principle, Spar's move was good because to date not much pressure had been exerted on the big players in the industry.
"The pressure for BEE mostly always comes from your buyer, and it is clear that Spar wants to strengthen its loyalty between itself and its employees," he said.
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