Avusa proposal has BEE sting
March 14, 2008
 By Ann Crotty
Johannesburg - Avusa's plans to implement a black economic empowerment (BEE) transaction involving 10 percent of its equity has been cited as yet another reason for voting against the proposed unbundling of its 33 percent stake in Caxton.
Next Tuesday Avusa investors will vote on the unbundling proposal. However, the decision might be known today, as proxies, which are used by most of the shareholders, must be lodged by this morning.
Details of the planned BEE deal, contained in the prelisting statement that was issued on February 25, reveal that 5 percent of the equity issued for the transaction will be held by members of management "and the balance by qualifying staff members".
Avusa will fund the cost of the deal, which will be implemented after the unbundling of Caxton and will have to be approved by shareholders.
While investors are not averse to a BEE deal, one analyst remarked yesterday that the cost implications added to the substantial benefits that fund manager Allan Gray would secure as a result of the unbundling.
In terms of an agreement with Mvelaphanda, Allan Gray will sell as much as 30 percent of Avusa to Mvela at about R45 a share, as soon as the Caxton unbundling is implemented.
This means Allan Gray will not only secure a "control" premium but will also avoid sharing the cost of the 10 percent BEE deal.
The analyst remarked that the BEE transaction, which involves a lock-in period for the participants, would help to secure a control position for Mvela, as it would make it difficult for another party to buy a stake of competing size.
Yesterday Kagiso Asset Management, which manages about 1 percent of Avusa on behalf of clients, said it was recommending that its clients vote against the unbundling.
Abdul Davids, a portfolio manager at Kagiso Asset Management, said the firm was concerned about the destruction of value for Avusa shareholders from the transaction, as well as the likely reduction in the value of the 33 percent stake in Caxton once it was separately listed in ElementOne.
He said: "The control structure of this stake in Caxton is complex and ultimately rests with the Moolman Coburn Partnership, which means that they are the only natural buyers."
He added that Terry Moolman, the chief executive of Caxton, would not be an aggressive buyer of the stake as it would suit him for it to be delisted.
In terms of the JSE rules, if ElementOne buys no additional assets within 12 months, it will have to be delisted.
These considerations make the unbundling unattractive for many Avusa shareholders.
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