BCX's BEE partner cashes out

Johannesburg, 25 Mar 2008

Business Connexion's (BCX's) black economic empowerment (BEE) shareholder Gadlex will receive R70 million by selling 5% of its BCX interest back to the company.

Gadlex is made up of BCX executives Benjamin and Isaac Mophatlane, Bridgman Sithole and Nkenke Kekana. It will retain a 20.01% shareholding in BCX's operating company.

In a notice to BCX shareholders, Investec revealed the two companies had entered into an agreement, which would see BCX replacing Gadlex's third-party funder by subscribing for preference shares in Gadlex.

It would then acquire BCX shares from Gadlex, allowing the BEE company to "realise cash of R70 million". This would be equivalent to a 5% shareholding in BCX. Finally, the parties will amend the existing shareholding agreement to ensure continuing BEE shareholding for between three and five years.

Restructuring BEE

The company previously hoped Gadlex would exercise its right to switch its 25.01% shareholding from the operating company to the JSE-listed holding company. The right to switch this holding became available in November 2006; however, Gadlex chose not to exercise this right.

As a result, BCX has embarked on this programme as a way to restructure its BEE shareholding in a manner that complies with the Department of Trade and Industry Codes of Good Practice, legal and tax requirements.

"The [new agreements] will form part of the BEE restructuring, which - in its entire form - will assist in providing more efficient funding for Gadlex and enable Gadlex to realise some value as they are not exercising their switch right. The BEE restructuring also ensures BCX's BEE credentials are secured at 20.01% as opposed to a likely higher dilution if the existing switch right were to be exercised," advised Investec.

Unaudited pro-forma effects of this deal reveal BCX's earnings per share (EPS) and headline EPS are likely to reduce by 3.3% and 3.2% respectively.

BCX will settle the acquisition with excess cash it already has on hand.