Reunert in R1.1bn BEE deal

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 21 Nov 2006

Listed electronics and electrical engineering group Reunert is to introduce a black economic empowerment (BEE) shareholding stake and has sold a percentage of its firm to a company headed up by four women.

On the back of its results presentation yesterday, the company announced a R1.1 billion BEE deal that will see 9.5% of the company in black hands. The two-part deal sees 30% of the empowerment stake being sold to Peotona Group Holdings and 70% of the stake to be held by a broad-based BEE educational trust.

An employee scheme will also be initiated to benefit Reunert employees who are not already participants of a share option scheme.

Peotona was founded by well-known personalities Cheryl Carolus, Dolly Mokgatle, Thandi Orleyn and Wendy Lucas-Bull. Carolus says while the company is looking at infrastructure-related investments across the board, the company is excited by the possibilities offered in ICT.

She says SA has opportunities to become more competitive in ICT as liberalisation beds down and the introduction of new technologies, for example in telecommunications, sees the country leapfrog older technologies.

Making it work

The deal, which is being vendor financed by Reunert, sees the female-led company locked in for 10 years. CEO Gerrit Pretorius says the company wanted to attract people who would make an effort and ensure the project works.

While much criticism has been levelled at firms repeatedly empowering with the "same old faces", he says choosing familiar names was done on purpose, as the company could be sure of a successful venture.

He adds the empowerment partners would benefit from the deal but, in turn, they would "equip a lot of South Africans to make a lot of money".

Pretorius says while the deal had taken a long time, the company wanted true empowerment and sought a deal that would also look after its staff. "It's callous the way employees have been treated sometimes."

The employee scheme will benefit about 6 000 employees who will receive 100 shares each, which will provide them with immediate economic benefits, but must be held for five years.

Pretoruis says the Rebatona Educational Trust is aimed at assisting school-leavers to further their education and offers a one-year bridging course that aids learners with mathematics, science and English tuition.

So far, having started in 1993, 500 young black South Africans have been assisted, of which about 400 proceeded to tertiary education unaided, he notes.

The cost of the deal represents about 3.1% of the company's market capitalisation at a weighted average share price of R66, which was then discounted by 10% for the deal. Its share closed at R80.50 yesterday, up from Friday's close of R79.

Reunert will take a R471 million charge through its books next year, which will not affect its bottom line, and the deal must still be approved by shareholders in March.

The company, which has a 40% stake in Siemens Telecommunications and owns Nashua Mobile, reported revenue up by 17% to R8.2 billion. Operating profit moved up 39% to R1.3 billion.

Related stories:
Reunert seeks benefit from infrastructure spend
Reunert advances BEE deal
Reunert, PSG form finance company
Commodity prices temper Reunert growth
Positive outlook for Reunert
Nashua Mobile, Broadband integrate