Coronation Fund Managers plans to implement BEE transactions that will lift its level of black ownership to 51%.
The company already has a verified 31% level of black ownership, with R263bn, or 42%, of total assets under management (AUM) being managed by black employees, the group said in a statement on Friday.
In terms of the transactions, Coronation will issue new shares to two BEE trusts at a nominal subscription consideration of R0.0001 a share.
Coronation will conclude subscription and notional funding agreements which will lead to the establishment of an employee share ownership plan (ESOP) and a broad-based ownership scheme (BBOS).
A total of 30.37-million shares will be issued to the ESOP, or 7.84% of its issued share capital with a market value of R1.2bn, while 7.2-million shares will be issued to the BBOS, or 1.86% of Coronation's issued share capital, valued at R287m.
Subject to all the conditions being fulfilled, Coronation is targeting issuing the subscription shares on December 1.
The group said notwithstanding its level 1 contributor status and existing black ownership level, it continues to face challenges related to not having 51%.
It said black ownership requirements by capital allocators could place a meaningful portion of Coronation’s AUM at risk in the future. In addition, Coronation is unable to participate in industry surveys geared towards asset managers with majority black ownership and this excludes it from participating in certain client mandates.
Coronation has also experienced outflows which were specifically allocated to asset managers with at least 51% black ownership, it said.
Without the required ownership level, Coronation was exposed to the possibility that maintaining its current AUM would come under increased pressure, as well as limit its ability to attract additional assets in SA, it said.
These factors may consequentially affect its market share, and therefore lead to a possible erosion of shareholder value.
“Accordingly, an enhancement to Coronation’s current level of black ownership is a business imperative in the current operating environment, enabling the business to enhance its competitive position, capitalise on growth opportunities requiring higher black ownership and maintain its market leadership,” it said.
Coronation shareholders holding 26.95% of the issued share capital have provided letters of support to vote in favour of the proposed transaction.
The company’s shares closed down 2.33% at R39 on Friday.
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