Counting the high cost of R26bn venture

South Africa's biggest single broad-based black economic empowerment (BBBEE) transaction to date will cost global petrochemical giant Sasol R7,2billion to facilitate.

South Africa's biggest single broad-based black economic empowerment (BBBEE) transaction to date will cost global petrochemical giant Sasol R7,2billion to facilitate.

Christine Ramon, chief financial officer of Sasol, said yesterday that R130million was a direct cash cost while the remaining R7,1billion was a non-cash cost equating to about 2,8percent of Sasol's market capitalisation.

A R3,3billion portion of the cost will be recognised immediately, with the balance expensed over 10 years, Ramon said.

The shares will be issued at R366, which is an 11percent discount to Sasol's closing price of R410 a share last Tuesday, but 28percent higher than Sasol's share price of R285 last September when the BBBEE was first made public.

This means Sasol's share price has climbed R125 in six months, making the value of the transaction R8billion more expensive at R26billion.

"We want to ensure the success of our BEE transaction," said Ramon.

For this reason, Sasol will be facilitating up to 80percent of the deal, she said.

The company is expecting an equity contribution of R1,6billion from the sale of its shares through its retail offer.

Ramon said the equity contribution, together with the external funding, would amount to about R8,1billion or 35percent of the transaction.

The financial effects of the transaction are limited to non-cash charges. - I-Net Bridge

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