South African-based MTN said on Friday that it would allow a newly-formed company to purchase additional shares, resulting in MTN being further empowered.
The new company (Newco) will be created jointly by Alpine and M1. M1 is owned by Investcom shareholders, the Lebanon-based Mikati family, while Alpine was formed in 2002 and key parties include MTN CEO Phuthuma Nhleko and CFO Rob Nisbet.
In an announcement to shareholders on Friday, Alpine and M1 said they would increase their stake in MTN "over and above" any shares they already had in Africa's largest cellular provider.
"The MTN Group believes black economic empowerment is a key requirement for the promotion of sustainable economic growth and social development in SA.
"Besides its core business objectives, MTN is committed to transformation in SA, both at a shareholder level and throughout its business," MTN said.
Positive impact
The MTN board has waived certain clauses in its agreement between it and M1 relating to the acquisition of Investcom, allowing Newco, or M1, to acquire additional MTN shares, MTN told shareholders.
A committee appointed to investigate the proposed deal determined that the transaction "will have a positive impact on the MTN Group in the form of enhanced BEE ownership credentials and improved scoring in terms of the codes".
Newco will be funded by M1 and third-party financiers and will purchase MTN shares at an unspecified price and time. "Newco will only acquire such MTN Group shares if, in its view, price, market conditions and other macro-economic factors are favourable," shareholders were told on Friday.
M1 is to receive all of the economic benefits in Newco until it receives a specified return on its investment. Any return above this is to be shared according to a predetermined ratio between Alpine and M1.
The transaction remains subject to certain conditions, which, the companies said, "may not be fulfilled".
Alpine and a subsidiary, Newshelf 664, were initially established to benefit "eligible permanent staff employed by MTN Group and its South African subsidiaries as well as eligible senior staff members of its African operations".
At the end of last year, Alpine held and controlled 243.5 million MTN shares through Newshelf. Over 75% of the value of these shares - after costs - will be distributed to historically disadvantaged South Africans.
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