Sasol Drops $950 Million Share Plan for Black-Investor Debt

ABIDJAN (Capital Markets in Africa) – Sasol Limited, the world’s largest maker of fuel from coal, abandoned a plan to sell about 13 billion rand ($950 million ) of shares in order to repay debt owed by investors who participated in a transaction to boost black ownership of the company.

Johannesburg-based Sasol transferred a stake to about 250,000 black investors in 2008 in a so-called black economic empowerment deal. The transaction was partly financed through the issue of preference shares to banks, which the investors will have to repay next year as the deal unwinds. A decline in the company’s stock since the mid-2014 means their equity won’t cover that debt, leaving Sasol on the hook for the more than 12 billion rand they owe, plus transaction costs.

Sasol won’t pursue its preferred funding option announced on Sept. 20 “of issuing up to 43 million ordinary shares through an accelerated book-build process” and is considering other options, the company said in a statement on Monday. The new funding plan will be announced in February. “Sasol’s intention is to mitigate the amount of shareholder dilution whilst still maintaining Sasol’s investment-grade credit rating.”

South Africa has set targets for black ownership as it seeks to redress the economic inequalities stemming from white-minority rule under apartheid that ended in 1994. When its so-called Inzalo transaction unwinds next year, those investors will have the option to participate in Sasol’s next leg of empowerment, Khanyisa, which aims to take black ownership of its South African unit to 25 percent.

Sasol’s stock fell the most in 15 months after the announcement of the share-sale plan on Sept. 20. Alternatives are being sought “following extensive engagement with shareholders,” it said. The shares climbed as much as 3.4 percent on Monday, and traded 2.6 percent higher at 395.06 rand as of 1:28 p.m. in Johannesburg.

Source: Bloomberg Business News