Black empowerment comes of age: Kagiso and Tiso announce R12bn proposed merger of equals

09 December 2010

In what will be a landmark transaction, signalling a new era in Broad Based Black Economic Empowerment (BBBEE), Kagiso Trust Investments ("KTI") and TisoGroup ("Tiso") today announced that shareholders of the companies are working towards putting together a proposed merger of equals. Once approved, the merger will create a black owned investment champion of scale, with a complementary and diverse base of quality assets. The merged company will have a gross asset value in excess of R12billion and will be managed by a strong, predominantly black, management team. The new entity will be named Kagiso Tiso Holdings (KTH).

The proposed merger demonstrates the commitment of the two companies to creating an enterprise driven, professionally run, black company focused on long term sustainability and value creation. The merging of the two entities will ensure a stronger BBBEE player that will provide sustainable benefits to a wider net of beneficiaries. In particular, the proposed merger will strengthen the independence and self sustainability of Kagiso Trust and the Tiso Foundation, both significant shareholders in KTI and Tiso, respectively.

The proposed merger, which has the support of all the shareholders, will create a sizeable player, with a strong brand and critical mass that will allow better access to larger and more attractive transactions. Kagiso Tiso Holdings will have the capacity and scalability to grow robust investment platforms in key growth areas, particularly in infrastructure, media and ICT, healthcare, resources, property and financial services. Bringing the two companies together creates a strengthened management team with the capacity to manage a more diverse portfolio.

The shareholders of Kagiso Tiso Holdings will consist of a diversified group of parties with the largest shareholder grouping comprising two Public Benefit Organisations, namely, Kagiso Trust and Tiso Foundation.

Nthobi Angel, Chairman of KTI, commented "Kagiso Tiso Holdings captures the legacy that has been created by both entities and signifies the birth of a new progressive champion in the South African investment community. The creation of a socially conscious business group of this magnitude will go a long way to extending the sustainability and the depth of Kagiso Trust's work."

Nkululeko Sowazi, Chairman of Tiso, said "The proposed merger represents a coming of age and maturation for BEE and transformation. Kagiso Tiso Holdings represents a commercially viable fusion of the various components of broad based black economic empowerment. The creation of Kagiso Tiso Holdings will enhance our ability to play a part in contributing towards South Africa's socio-economic development."

Kagiso's Group Managing Director, Kgomotso Matseke, said "The consolidation of our platforms will fast track the growth aspirations of both companies. Our complementary and diverse assets will allow for strategic consolidation and stronger cashflows. Importantly, our joint platform, which combines a stronger balance sheet with a depth of professional skills and management, will allow us to participate in more meaningful transactions."

David Adomakoh, Group Managing Director of Tiso, added "KTI and Tiso have similar histories, and shared values. Both are professionally run platforms. Kagiso and Tiso have successfully worked together in the past and this track record and experience have shown a convergence of internal working cultures. The new entity will be characterised by a fusion of a commercial delivery ethic and a business culture grounded in responsible corporate citizenship."

Staff and management will continue to be the back-bone of the success of Kagiso Tiso Holdings and as such will be exposed to a significant interest in the merged entity. The formation of Kagiso Tiso Holdings will allow for the creation of a balanced Board ensuring appropriate representation of key shareholders, a combination of professional skills and a strong executive management team.

Kagiso Tiso Holdings will focus on investing in businesses that produce sustainable strong cash flows, and deliver consistent growth in capital value and dividends to shareholders.

The proposed merger is subject to the fulfilment of a number of conditions precedent. Nedbank Capital has been involved in providing independent advice to both parties and will ensure that the continued evaluation and implementation of the proposed merger follows a rigorous and independent process.

If approved it is anticipated that the proposed merger will be implemented in mid 2011.