Ins and outs about Sasol BEE shares
The Sasol Inzalo BEE scheme offer closes on July 3 for the funded invitation and on July 5 for cash payment, but some investors are still not sure how to differentiate between the options.
The BEE share allocation is open to black South Africans and black groups.
A total of 3percent of Sasol's issued share capital has been split between the funded option, where a small cash contribution is required, and a cash payment.
Both options accommodate black individuals, companies, partnerships or trusts, stokvels, church groups and families.
The total number of Inzalo and BEE shares issued will not exceed 18,9million shares. In the case of excess applications, money will be refunded, with interest.
What does investing in Sasol BEE shares mean?
If you are going to buy Sasol Inzalo shares through funded invitation it will work as follows:
l An applicant is expected to subscribe for Sasol Inzalo unlisted shares at R18,30 a share for the first 100 shares and R36,60 a share thereafter, subject to a minimum of 25 at the total price of R457.
This means 100 shares at R18,30 will amount to R1830. an additional 200 shares at R36,60 will amount to R7320. This brings the total shares purchase to 300, costing R9150.
l In the case of cash invitation, the same quantity of 300 shares at R366 will cost R109800 cash settlement.
l This difference in price, that is, R109800 minus R9150, which equals R100650, will be funded by Sasol by issuing debt instruments like preference shares to participating financial institutions.
l The empowerment period for Sasol Inzalo shares is ten years. This means that all the Sasol Inzalo shares sold to black people will not be listed on the JSE until the end of this period.
The yearly dividends from Sasol in respect of the funded shares will be utilised to service the preference shares.
l After the empowerment period, if these debt instruments have not been fully settled, then part of the shareholding will be sold to defray the outstanding debt.
For example, if you have paid for 300 shares through funded invitation, part of the 300 shares can be sold to settle any outstanding debt after the empowerment period.
Say 100 shares can be sold and the remaining 200 shares will be handed over to you.
The funded invitation allows you to share in the upward movement of Sasol price by putting very little money at risk. Sasol expects to issue 16,1million shares.
Sasol BEE Cash Invitation
Cash invitation involves full payment of the issuing price.
l The minimum is 10 Sasol BEE shares at a total price of R3666, or R366 a share.
l The yearly dividends will be paid directly to the shareholders.
But, the closing date of the offer, July 5, falling in the month of July, means that BEE shareholders will not qualify for the Sasol final dividend to be declared for the financial year ending June 2008.
l During the empowerment period, only limited trading in the shares will be allowed because these shares can only be traded among black people.
l Also, there is a lock-in period of two years for cash invitation and three years for funded invitation whereby trading will not be allowed at all unless under special circumstances.
But after 10 years, all the shares will be listed on the JSE, and free trading will now be permitted.
Sasol expects to issue 2,8million shares for BEE Cash Invitation.
Experts believe the BEE cash offer is more straightforward.
You pay R366 for a share which last week traded at almost R480, an attractive discount of 25percent.
Though the initial lock-in period, plus subsequent limited trading until year 10, makes it a substantially less desirable option, subscribers could make hundreds of thousands of rands.
The preference share and funding mechanism of Sasol Inzalo funded invitation is seen as complex but attractive.
The option is made worse because the share purchase is mostly funded by a small portion of equity - about R400million - and huge debt (R5,52billion).