JOHANNESBURG (Business Day) -- The Tokyo Sexwale-led Mvelaphanda Group [JSE:MVD] sold its 23% stake in subsidiary Mvelaphanda Resources [JSE:MVR] yesterday to unlisted empowerment group Incwala Resources, the group said yesterday.
Incwala's purchase has helped eliminate Mvelaphanda Holdings' and Mvela Resources' pyramid structure, also enhancing the latter's empowerment status.
On completion of the transaction, Mvela Resources will have a direct black economic empowerment holding of 30%, 23% of which will be held by Incwala and 7% by other black shareholders, including Mvela Group.
Incwala will fund the purchase through cash and debt facilities.
Following the transaction, the group said gearing would be low and well within the industry average and its net asset value would be well in excess of $1 billion.
Although Mvela Resources was one of the first empowerment entrants in the sector, it has not been involved in any headline-making empowerment transactions since the Gold Fields [NYSE:GFI] deal more than 18 months ago, as potential partners queried its empowerment credentials.
The company has earned the title of "usual suspect", with many entities choosing to take other empowerment routes, in an attempt to diversify the flow of empowerment deals.
"We are buying a direct interest in the company, which eliminates the previous pyramid structure," Incwala CEO Arne Frandsen said.
Mvelaphanda Group has also transferred Resources' management control to Incwala.
Mvela Resources has varying interests in Gold Fields (15%), Northam Platinum [JSE:NHM] (22%) and Trans Hex Diamonds [JSE:TSX] (20%).
Formed in September last year and chaired by former BHP Billiton [NYSE:BHP] CE Brian Gilbertson (pictured left), Incwala Resources, a broad-based black empowerment company reputed to have 50,000 previously disadvantaged beneficiaries, acquired the stake for R20 a share, or R760 million.
Incwala was formed to buy an 18% stake in Lonmin Platinum's [AIM:LMI] underlying asset, Lonplats, the world's third-largest platinum producer.
Through yesterday's transaction Incwala effectively becomes the empowerment partner of gold producer Gold Fields, platinum company Northam and diamond group Trans Hex.
The purchase price is in line with the volume-weighted average share price of Mvela Resources over the past 30 days and compares with the company's net asset value a share of R35.
Mvela Resources's share price reached a 12-month high of R24 soon after the announcement of the deal.
Frandsen said diversification of the group's asset base was the draw-card of the transaction.
Mvela Resources CEO Pine Pienaar said that, as a long-term shareholder committed to the resource sector, Incwala would bring strategic guidance, access to new sources of funding and new investment opportunities.
"The Mvela Resources board and management look forward to working with Incwala to create value for all stakeholders," said Pienaar.
Gilbertson said Incwala's goal was to create a flagship South African empowerment company and the Mvela deal was a huge step in reaching that goal.
"Mvela Resources is trading at a 30% discount to underlying asset value and if Arne (Frandsen) can get the company into direct cash flow access and eliminate the group's pyramid structure, it will do well for shareholders," he said.
Gilbertson likened the task ahead for Frandsen to what he faced during his time at one of the country's largest conglomerates, the now-defunct Gencor.
