JOHANNESBURG (Reuters) -South African insurer Old Mutual on Wednesday said it would increase its Black share ownership with a 2.8 billion rand ($186 million) empowerment plan which could dent its profit by 5.4%.
The move is classed as a Black economic empowerment (BEE) transaction, a government initiative to reverse ongoing economic inequalities almost three decades after the end of apartheid, encouraging companies to meet quotas in areas including Black ownership, employment and procurement.
Old Mutual said it would issue approximately 205.3 million new shares for cash to employee share ownership trusts and a special purpose vehicle for Black members of the public. The move would increase its BEE ownership percentage to over 30%.
“Beyond compliance, the group believes that it makes business sense to drive transformation and real empowerment – the more equal and inclusive society becomes, the more opportunity there is for the company to achieve sustained growth,” it said.
The new shares will constitute approximately 4.36% of Old Mutual’s current issued share capital and 4.18% of the enlarged share capital.
Employees will not be charged for shares issued via employee shareholder trusts, while Black retail investors will be able to buy a minimum of 200 shares at a subscription price of 2,000 rand payable upfront or a total of 100 shares for 1,000 rand to be settled over a 12-month period.
A portion of new shares will also be issued to a community trust for various Black community beneficiaries, initially focused on financial education, digital skills and Black small- and medium-sized businesses, at a price of 0.01 rand per share.
In a table giving an indication of the approximate impact on Old Mutual’s financial performance, the insurer said its headline earnings per share – the main profit measure in South Africa – could be 5.4% lower as a result of the plan.
It would cost around 917 million rand in expenses like administration costs, it continued, with the scheme open for 10 years.
Old Mutual shareholders will need to approve the transaction and the insurer will need to seek regulatory approval for the deal. Its shares were down 1.22% by 1408 GMT, and currently trade at 1,218 rand per share.
($1 = 15.0473 rand)
(Reporting by Emma Rumney; editing by David Evans and Elaine Hardcastle)
