MTN plans a giant empowerment deal in the new year that could be worth R10bn and which could result in up to 6% of its equity sold to black shareholders. The news comes as the cellular operator prepares to unwind the Newshelf 664/Alpine Trust structure that has generated billions of rand in wealth for MTN directors, management and staff.
MTN says the new share offer will be open to the public and is being done now to ensure that the group's status under SA's broad-based black economic empowerment codes of good practice are maintained after the unwinding of the Newshelf 664/Alpine Trust structure.
WHAT IT MEANS
 New deal comes as Alpine Trust unwinds
Deal size contingent on market conditions
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Most of MTN's black shareholding is through the Alpine Trust, which holds 13,1% of the group's equity though Newshelf 664. About 2 300 MTN staffers and directors stand to benefit when Newshelf unwinds later this month. MTN aims to allocate 75% of the benefits of the trust to black staff.
Three of MTN's top executives - CEO Phuthuma Nhleko, chief operating officer Sifiso Dabwenga and finance director Rob Nisbet - are each expected to walk away with a fortune. Nhleko holds an effective 7,92% of the trust and the FM calculates that he will receive about R270m; Dabengwa and Nisbet will receive nearly R190m each.
The new empowerment transaction will be open to all South Africans who are defined as black in terms of the codes.
MTN expects the new deal to result in 5%-6% of its equity ending up in the hands of black shareholders. It's not yet known what sort of discount MTN will offer, but assuming there is none, and based on the group's share price of R99,20 on December 15, the deal would be worth as much as R11,1bn.
The size of the transaction may change, though, depending on market conditions and the extent of reinvestment by beneficiaries of the Alpine Trust.
MTN and government pension fund administrator, the Public Investment Corp, have entered into an agreement to ensure the "orderly unwinding of the Newshelf structure". The agreement sets out the PIC's role in the new empowerment transaction, MTN says.
The unwinding is complex. The PIC will effectively have all the economic exposure to the MTN shares held by Newshelf. "Because the liabilities of Newshelf to the PIC match the value of MTN shares held, Newshelf will then have a nominal value," it says.
MTN will then acquire Newshelf for this nominal value. The group says it will settle or acquire all outstanding funding obligations in Newshelf through the payment of R400m in cash and the issue of 214m shares representing approximately 11,5% of MTN's issued share capital.
"MTN will effectively acquire 13,1% of its shares held through Newshelf in exchange for the issue of 11,5% of its capital," the group says. Most of this effective discount will not be retained by MTN but will be used to facilitate the new transaction.
The PIC has undertaken to make available up to 6% of its shares in MTN to facilitate the new transaction.
MTN hopes to conclude the transaction in the first half of 2009.
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