Grindrod and J&J Consortium announce a Black Empowerment deal

Nov 27, 2003
Author: P&S

Grindrod, South Africa’s major shipping and logistics company and a consortium lead by the J&J Group, headed by Jayrendra Naidoo and Jay Naidoo announced today that agreement had been reached on an empowerment transaction between Grindrod and the J&J Consortium.

The J&J Consortium will be issued with 9.6 million shares in Grindrod Limited at R9.70 per share payable in cash, which will see the J&J Consortium having an initial 10% interest in Grindrod. In addition shareholders will be asked to agree to a subscription agreement whereby the J&J Consortium will take up a further 15.1% in Grindrod within the next four years at a price of R14.00 per share.

This announcement follows hard on the heels of an announcement by Grindrod Limited that it would be asking shareholders approval to buy back 8,9 million shares from a financial institution at R11.40 per share. It also follows an announcement that shareholders will be asked to vote on the dismantling of the ‘N’ share of Grindrod which will see a simplified share structure.

Ivan Clark, Grindrod Managing Director said: “At the end of the day the three transactions facilitate each other and leaves Grindrod with a simplified share structure and a truly empowered group at shareholder level”.

“Investors have for a long time not liked the ‘N’ share so it is good to see it going and as a truly South African company we are totally committed to developing with all South Africans an even bigger and better South African national shipping company,” he said

Grindrod has produced good interim results to June 2003 and despite the strength of the Rand it has stuck by its prospects clause for growth in earnings in the second half of the year. It is due to release its results for the full year to December towards the end of February 2004.

A delighted Jay Naidoo, chairman of the J&J Group, said: “We have already done a deal with Grindrod at operating level through Grindrod J&J Logistics, a major warehousing and distribution subsidiary of the Grindrod Group. We have worked well together with the Grindrod Executive team in developing this empowerment transaction at shareholder level and have had the support of some of South Africa’s major financial institutions in developing the transaction”.

He went on to say: “This is fundamentally a commercially driven transaction where our strategic alignment with Grindrod is a major stepping stone to achieve our goal of being a major player in the logistics sector in SA, Africa and globally. In addition Grindrod benefits from the established empowerment credentials of the Consortium. We look forward to participating in South Africa’s major national shipping and logistics company”.

Endorsing this Clark said: “We were adamant we didn’t want empowerment for empowerment sake. We needed shareholders and Directors who will add good business values and work with us into the future through a truly South African company."

The consortium consists of the J&J Group, Sphere Investments and Chancellor House trust all of which represent meaningful empowerment interests.

“The initial 10% is within the general authority given to Directors by shareholders to issue shares at up to a 10% discount to the weighted average price which Grindrod traded at over the last 30 days,” said Clark.

“The future subscription price at R14.00 is above the current market price but based on Grindrod historic earnings equates to a 7 x price earnings. This is a fair price given our confidence with the group’s current growth momentum and now the added advantage of having a value adding black partner,” Naidoo added.

According to Clark the maritime industry in South Africa is developing its own Maritime Black Empowerment Charter which should be finalised early next year. He said Grindrod was determined to lead from the front as a major player in the Maritime Industry. “We have already done several empowerment deals at operating level and plan to continue this so that we end up empowering our local operations at operating level across a broad base of South Africans while adding participation at Grindrod shareholder level.”

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