Sappi plans R814m empowerment deal

Paper and pulp manufacturer Sappi on Wednesday announced a proposed R814-million broad-based black economic-empowerment (BBBEE) deal that would benefit employees and communities surrounding its mills and plantations in South Africa.

CEO Ralph Boëttger said in a conference call that the deal was an important milestone for the group and would translate into the empowerment of about 30% of its South African business.

“We are pleased that we’ve been able to structure an equity-based empowerment deal at the Sappi Limited level so soon after the promulgation of the Forest sector charter,” he commented.

The deal would involve the issuing of about 24,3-million shares, or 4,5% of the group’s issued share capital.

Of this, 20-million shares, which would not be listed on the JSE, would be issued to three trusts, the employee share ownership plan (ESOP) trust, the management share ownership plan (MSOP) trust and the Sappi Foundation trust, which would focus on projects to benefit the communities surrounding the paper manufacturer’s mills and plantations.

The MSOP trust was especially set up for African, coloured and Indian managers.

Boëttger said that the proposed deal would help to retain and attract staff, particularly highly skilled black managers.

A further 4,3-million shares would also be issued to the participants of Sappi’s 2006 Plantation BEE Land Deal, which had now been restructured.

In April 2006, the group announced that an empowerment consortium, the Lereko Property Consortium (LPC) had acquired a 25% undivided share in Sappi’s South African plantation land, excluding the value of the plantations and the land, coupled with the right to develop the Sappi land not used for forestry operations.

The consortium, which was led by Lereko Investments, had included participation by Sappi employees through a Workers trust, a not-for-profit organisation, Malibongwe Womens Development, and financial services company AMB Capital.

At the time, the consortium planned to implement property-development initiatives across nonplantation areas of the Sappi land.

Following the unwinding of the rights of the 2006 deal, full ownership of this land would return to Sappi.

However, the partners in the initial deal have agreed to continue pursuing the original property development aims, which has led to the creation of a new structure, named the LPC 2, in terms of which these strategic partners would retain their joint development right over the Sappi land.

Sappi shareholders were expected to vote on the proposed BBBEE deal on April 29.

If accepted, Sappi’s South African employees would hold a combined 77,5% of the 24,3-million shares. This would include 62,5% to be held by members of the ESOP trust and 15% by the MSOP trust.

The strategic partners under the LPC 2 structure would hold 12,5% of the shares and the Sappi Foundation trust the remaining 10%.