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JSE-listed technology group Business Connexion is decreasing its black economic empowerment (BEE) shareholding.
This comes at a time when companies are trying to rack up transformation points by entering into BEE deals.
BCX entered into an agreement with empowerment partner Galdex Holdings (which currently owns 25,1percent of BCX) to buy back a 5percent shareholding in the Business Connexion operating company.
The deal is worth R70million and will be used to help refinance a R77million debt held by Gadlex.
Rajay Ambekar, an analyst at Cadiz Asset Management, said: "This (downsizing) equates to an implied valuation of the Business Connexion operating company of R1,4billion.
"The listed company has a market capitalisation of R1,3billion, but R600million of that is cash, which gives the operating company a market valuation of R700million," he said.
According to Ambekar's calculation BCX is paying twice as much as what the market is currently valuing the operating company.
"It's an enormous premium and I would like to understand the rationale and benefit for shareholders in concluding such a transaction," Ambekar said.
He said the company was only moving away from third party debt to vendor financing, where it takes loans from suppliers.
The company said that while the transaction would reduce Galdex's shareholding to 20,1percent, it would not affect the companies BEE scorecard.