ANGLO American confirmed it had sold its 9.7% stake in Exxaro Resources for R3bn ($215m) or some R87/share representing a 10% discount to Exxaro’s share price of 96.60/share at close on the JSE on November 30.
Proceeds from the sale would be used to lower Anglo American’s debt pile which stood at $11.7bn at June 30, to below $10bn by the end of 2016. The improvement in commodity prices should enable Anglo to easily reach this target even without having to sell additional assets in terms of a previous debt reduction plan.
The share sale, equal to 35 million shares in Exxaro Resources, will be alongside the unwinding of Main Street 333’s (MS333) 51% stake in Exxaro Resources.
MS333 was Exxaro’s black economic empowerment (BEE) vehicle. The structure is being unwound because a 10-year lock-in agreement, signed in order to comply with the first mining charter, expired on November 28.
The balance of the shares MS333 holds in Exxaro Resources will, presumably, be reinvested in Exxaro in terms of a replacement BEE structure proposed by the company that will take Exxaro’s BEE holding to 30%.
The Industrial Development Corporation (IDC), the government-owned bank, is also selling shares in Exxaro following the unwinding of MS333, but it is also reinvesting some of them.
The sale also, in a small way, lessens is exposure to South African mining. Exxaro operates coal mines in Mpumalanga and Limpopo provinces and has investments in Tronox, a mineral sands company and Kumba Iron Ore, controlled by Anglo.
All in all – adding the shares MS333 and Anglo are selling – some 52 million shares, equal to 14.7% of Exxaro, will be distributed into the market.
In terms of Exxaro’s BEE restructuring, announced on November 22, Exxaro will pay R3.04bn to buy some of the shares owned by MS333.
This will enable MS333 shareholders to settle their bank debts – including a R486m loan to Exxaro itself – and then provide them with options to either reinvest in Exxaro’s new BEE structure, or take cash.
The tenure of the new BEE structure is for seven years with the transaction due to be completed no later than April 30. “High level terms” with shareholders in MS333 have been agreed but completion turns on transaction details.
