De Beers Societe Anonyme (DBsa) and Ponahalo Capital (Proprietary) Limited (Ponahalo Capital) today announced that definitive transaction agreements to implement the De Beers’ Black Economic Empowerment (BEE) transaction have been signed.

 

This follows the November 8, 2005 announcement stating that a Memorandum of Understanding had been signed between the two parties for the sale of an indirect 26 percent equity interest in De Beers Consolidated Mines Limited (DBCM) to Ponahalo Holdings (Proprietary) Limited (Ponahalo Holdings).

 

Ponahalo Investment Holdings includes business individuals (both men and women), and trusts representing disadvantaged women, people with disabilities and mining area communities.

 

The purchase price for the indirect 26 percent equity interest in DBCM has been adjusted from approximately R3.8 billion ($0.628 billion) announced in November, to approximately R3.7 billion ($0.612 billion) in accordance with the terms as set out in the Sale and Purchase Agreement.

 

The full announcement from De Beers Societe Anonyme and

Ponahalo Capital (Proprietary) Limited follows:

 

“De Beers has provided significant financial facilitation to ensure the transaction is robust and sustainable. The financing of the acquisition by Ponahalo Holdings has been arranged by De Beers, in conjunction with Ponahalo Holdings, and is structured as follows:

 

·        Seven (7) year funding amounting to approximately R2.9 billion provided by The Standard Bank of South Africa Limited, acting through its Corporate and Merchant Banking Division, with no recourse to DBsa;

·        Seven (7) year funding of approximately R800 million provided by The Standard Bank of South Africa Limited, acting through its Corporate and Merchant Banking Division, “guaranteed” by DBsa;

·        Ponahalo Investments equity provided by the business partners in Ponahalo Capital (in the amount of R10 million).

 

No equity contribution will be required from De Beers’ permanent employees and eligible pensioners as payment for their Trust Interests in the De Beers Equal Allocation Trust (“EAT”) or the De Beers Key Employee Trust (“KET”), which collectively will own 50% of Ponahalo Holdings. This also applies to the shareholding in Ponahalo Capital acquired by three broad based trusts benefiting disadvantaged women, persons with disabilities and community groups around De Beers’ operations.

 

De Beers Employee Trusts

An exciting aspect of this BEE transaction is the participation of De Beers’ South African based permanent employees and eligible pensioners through the EAT and the KET.

 

The EAT has been founded by DBCM to recognise and reward all South African based employees and pensioners for their contribution to the De Beers Group of Companies in South Africa and give participants the opportunity to share in the future growth of DBCM.

 

35% of Ponahalo Holdings will be owned by the EAT and the EAT will benefit approximately 17 000 permanent South African employees and eligible South African pensioners of De Beers.The EAT’s interest in DBCM will be allocated on an equal basis, regardless of race, seniority or length of service.

 

The Trust Interests in relation to the EAT will vest immediately, however, as the empowerment transaction is fully financed there is no current cash value for the Trust Interests and beneficiaries will only receive dividends from the Trust once the debt has been repaid by Ponahalo Holdings.

 

The KET, which will own 15% of Ponahalo Holdings, is intended to incentivise and attract key South African based current and future employees identified as significant contributors to the organisational objectives of the De Beers Group of Companies in South Africa. The substantial majority of beneficiaries of the KET will be historically disadvantaged South Africans (“HDSAs”)

 

The KET will allocate Trust Interests based on set criteria including, among others, sustained above average, high or exceptional job performance as well as adherence to and embodiment of company values.

 

Potential beneficiaries of the KET will demonstrate the ability to shape the future and possess the ability to contribute to the future value of De Beers in South Africa.

 

A portion of the KET is being set aside to cater for future South African based employees.

 

In order for De Beers to comply with the Mining Charter, beneficiaries of the EAT and KET will be restricted from selling, transferring or encumbering their Trust Interests until May 2014.

 

Ponahalo De Beers Broad Based Trusts

 

The broad based nature of Ponahalo Capital is encompassed in the Ponahalo De Beers Disadvantaged Womens' Trust, the Ponahalo De Beers Disabled Persons' Trust and the Ponahalo De Beers Community Trust, which collectively own a 45% interest in Ponahalo Capital.

 

The three Trusts have the following shareholding in Ponahalo Capital:

·        17.5% by the Ponahalo De Beers Disadvantaged Womens' Trust. The beneficiaries of this Trust will be groups, associations and organisations for the benefit of disadvantaged women;

·        10.0% by the Ponahalo De Beers Disabled Persons' Trust. The beneficiaries of this Trust will be people with disabilities; and

·        17.5% by the Ponahalo De Beers Community Trust. The beneficiaries of this Trust will be the mining communities around DBCM’s mines as well as communities from where a significant numbers of De Beers’ employees have been recruited. The majority of beneficiaries of all three broad based Ponahalo De Beers Trusts will be HDSAs.

 

The three Trusts will be the beneficiaries of R5 million each year, or R50 million in aggregate over the first 10 years, with the first R5 million being received in year one.

 

The beneficiaries of the Ponahalo De Beers Broad Based Trusts are currently being identified, however, this will occur after a process of consultation by the Trustees with local community based and non-governmental organisations with strategic direction to be provided by Ponahalo Capital. Awards will be made with the intention of maximising the broad based spread of HDSA beneficiaries across South Africa, predominantly in areas and communities around DBCM’s operations.

 

The three Trusts have been jointly settled by Ponahalo Capital and DBCM.

 

Finalising the Transaction

 

In addition to finalising the requisite financing arrangements, the transaction has also received the necessary regulatory approvals from the South African Reserve Bank and the South African Competition Tribunal.

 

The parties are confident that the remaining conditions precedent to the completion of the transaction will be satisfied by the 20th of April 2006.

 

Following completion of the transaction, the purchase price will continue to be subject to adjustments as specified in the transaction agreements."