Bafokeng fund leads Senwes BEE group - Treacle also has stake in R122m deal

Johannesburg, 7 December 2005 - Black economic empowerment group Bafokeng Consortium yesterday bought a 27,14% stake in agricultural services group Senwes for R122,7m.

The consortium comprises the Royal Bafokeng Finance, which has a 55% stake in the grouping, black-owned private equity company Treacle (35%) and Senwes board member and former Telkom executive Papi Magashula (10%).

The consortium bought the stake for R2,50 a share. It bought the share from Senwes holding company Senwesbel. Senwes MD Johan Dique said as the shares were bought from Senwesbel, there would be no negative effect on Senwes. The board of Senwesbel would decide what to do with the proceeds from the sale of the shares. The transaction gives Royal Bafokeng Finance, the nonmining investment arm of the Royal Bafokeng Nation, a foothold in agriculture. “Agriculture is important to rural economic development, especially with regard to employment opportunities. Other than financial spin-offs, we are looking at improving the levels of economic activities in the (Royal Bafokeng) nation,” said Royal Bafokeng Finance manager for strategic investments Dinao Lerutla yesterday.

The group has said it wanted to diversify the platinum-rich community’s investments beyond mining. The acquisition of the Senwes stake is an addition to its other investments which include full ownership of services group Fraser Alexander, a 10% stake in insurance firm SA Eagle, 20% of packaging group Astrapak and 26% of MB Technologies.

Dique said the company’s empowerment status will mean it was well placed to take advantage of future procurement opportunities. The deal was struck as the agricultural sector considers its broad based economic empowerment charter. The sector’s draft charter, released last month, requires companies to meet targets on areas such as ownership and preferential procurement.

The consortium partners raised their own finance. “That was one of our two main criteria. The investors must be prepared to invest their own money,” Dique said.

He said the other criterion was that the prospective partners had to be broad-based, benefiting a wide group of people and communities.

“Many entities which approached us were disqualified because of (not meeting) those two aspects,” Dique said.

Magashula, who in terms of the deal will own 2,7% of Senwes, said he had approached a financial institution to fund his stake.

“Senwes management has shown that they have embraced transformation and want to do things the right way,” he said.

Treacle director Jacob Mashike said that at R2,50 a share, Senwes was undervalued “relative to its long-term intrinsic value.”

Dique said that compared with the net asset value at year-end on April 30 this year, the sale value showed a discount of 19%.

Senwes has about 32% of the total summer grain crop in its silos.