Barloworld in the black
Zweli Mokgata     Published:Jun 13, 2008 – The Times

 Barloworld’s announcement of a R2.4- billion empowerment deal yesterday was welcomed by analysts and saw the group’s share price rise more than 4 percent.

The SA-based multinational industrials firm, which represents leading international brands such as Caterpillar earth-moving machines and Avis car hire, said yesterday that it would sell a 10 percent stake to black investors as part of its black economic empowerment (BEE) drive.

The company came under fire last year from one of its main shareholders, the Public Investment Corporation, which criticised it severely for not having implemented BEE. This was followed shortly by the first announcement of the empowerment deal in January last year.

Under the deal, strategic black partners will be allocated 5.88 percent of Barloworld’s ordinary issued share capital, while 2.39 percent will be held by employees, black management and black non-executive directors, 0.78 percent by an educational trust and 0.95 percent by community service groups.

Abri du Plessis, chief investment officer at Gryphon Asset Management, welcomed the BEE deal, saying: “I think the structure of the deal is more or less what the market expected at this stage.”

Clive Thomson, Barloworld’s chief executive since December 2006, feels that the company’s BEE drive has created solid transformation.

“We have undertaken a number of transformation initiatives over the past 18 months in various empowerment categories, and the structure of this deal ensures that the process will continue for at least the next five years,” Thomson said yesterday.

Barloworld — which was assisted by empowerment consultancy Empowerdex in structuring the deal — said that the transaction amounted to 3.2 percent of its market capitalisation.

Keith Levenstein, CEO of EconoBEE, said although the deal was only 10 percent of the entire group, it was a good sign to see a mixture of investors rather than a single major partner reaping the benefits. “It’s good to see them including women and internal partners, as the [BEE] codes [of Good Practice] encourage a wide range of consortiums.” Levenstein said that Barloworld was still lagging in appointing senior black managers into its ranks.

Last year the company made four appointments to its committee whereas it previously had no black faces.

According to Thomson, the three subsidiaries run by black chief executives, Motor Retail, Logistics Africa and equipment contribute R884-million, 32 percent of the group’s overall operating profit.

“We’ve allocated 3.1 million shares for a black managers’ trust. Half of that will be allocated to the 140 black managers we already have and the rest will be reserved to attract skilled people into management positions,” Thompson said.

Barloworld shares closed 1.05 percent firmer at R86.90. — Additional reporting by Reuters

Gandaganda, which takes 1,33 percent stake or R313 million worth of shares, is led by Dominic Sewela, CEO of Barloworld Equipment SA. The trust includes entrepreneurs and emerging business women and a trust still to be formed for the black employees of Barloworld Equipment (South Africa).

Dominic Sewela said: “This is our first BEE investment. Barloworld has been committed to the principles of BBBEE for a long time and as employees we are delighted to be selected as strategic partners in the equity transaction. We will seek to add particular value by deploying full time employees to Barloworld Equipment as the company continues to grow.”

  • Zwavhudi was formed by Litha Nkombisa, CEO of Barloworld Motor Retail Southern Africa and Ciko Thomas, Marketing Director of Barloworld Automotive. They were joint owners of Joburg City Auto BMW and VW Joburg City prior to joining Barloworld. It will hold a 0,44 percent stake amounting to R104 million.

    Litha Nkombisa said: “We are pleased that Barloworld should decide to include key black management in the company as strategic partners. We have already embraced the prevailing spirit, work ethic and determination within Barloworld to ensure that its businesses grow profitably into the future and that opportunities for its employees continue to be developed.”

  • Yunus and Judada Akoo are the founders of the YJ Family Trusts and have had a relationship with Barloworld since 2003 through various motor dealerships in Durban and Pietemaritzburg. The Akoo family has been active in the retail motor industry since 1980. The YJ Family Trust will receive a 0,67 percent (R158 million) stake.

    Yunus Akoo commented: “We have worked with Barloworld for some years and are excited to be able to participate in their equity transaction. This will mean an even closer relationship with the company and increases our determination to contribute to the success of the business.”

  • Ayavuna Women’s Investments, led by Hixonia Nyasulu – a non-executive director of Barloworld – receives a 1,5 percent stake (R353 million). It is an investment company owned and managed by black women established for the benefit of black women.

    Nyasulu said, “Our involvement in this transaction adds diversity in the form of black women with a rural development angle. Many black women have benefited from our activities over the years, most recently three rural girls high schools from a R3.3m donation.”

  • Moty Capital Partners formed a consortium specifically for the Barloworld BEE initiative. It is broad-based comprising experienced black business people, trade and hawkers associations, charitable trusts and youth.

    Bheki Sibiya, chairman of Moty said: “As a consortium we are in a position to provide a ready market for Barloworld’s products through our contact network and can assist the company with their expansion into Africa and also with their transformation and leadership. We are a very broad-based consortium and over 100,000 black people should benefit.”

  • Izingwe Holdings is a significant investor in mining, engineering and infrastructure development and are suppliers to those sectors.

    Sipho Pityana of Izingwe said, “We are active shareholders always seeking to make value enhancing interventions for our underlying investments. We know the sectors in which Barloworld operates well and expect to make a meaningful contribution to the business.”

  • The Disability Empowerment Concern Trust, the sole shareholder of the DEC Investment Holding Company (Proprietary) Limited was established in 1996 representing people with disabilities. It was also awarded 0.32 percent.
  • Ikamva Labantu Empowerment Trust was founded in the late 1960’s to provide primary health, education, skills development, food security, enterprise development and provision of shelter.
  • Barloworld brought in a mix of community services partners including the Shalamuka Foundation (0,32 percent ) representing rural communities focused on developing teacher skills. It was formed in 2006 to raise long term sustainable funding for the highly regarded Penreach programme, which provides teacher skills workshops to about 2,000 public school teachers in 900 schools.
  • The company also made a one percent provision for its General Staff Trust where each Barloworld employee in South Africa would receive an average of R15 000 worth of shares. The employee component includes black non-executive directors and will hold in aggregate 2.39 percent of the issued ordinary share capital of Barloworld