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ARCELORMITTAL SOUTH AFRICA LIMITED - Proposed Ikageng Broad-Based Employee Share Scheme

Release Date: 31/07/2015 07:06
Code(s): ACL     PDF:  
Wrap Text
Proposed Ikageng Broad-Based Employee Share Scheme

ArcelorMittal South Africa Limited
Incorporated in the Republic of South Africa)
(Registration number: 1989/002164/06)
Share code: ACL
ISIN: ZAE000134961
(“ArcelorMittal” or “ArcelorMittal Group” or “the Company")


The ArcelorMittal proposed Ikageng Broad-Based Employee Share Scheme
(the “Scheme”), operated through The Ikageng Broad-Based Employee Share
Trust (the “Trust”) as constituted and regulated in terms of the Trust
Deed (the “Trust Deed”)


1.    INTRODUCTION

      1.1. The Board proposes to introduce the Scheme, which is a
           broad-based employee share scheme, with the primary
           objective of facilitating Broad-Based Black Economic
           Empowerment (“BEE”) ownership in the ArcelorMittal
           Group in compliance with the Codes of Good Practice on
           BEE (the “Codes”) published in terms of the Broad-
           Based Black Economic Empowerment Act, 53 of 2003 (the
           “BBBEE Act”) and applicable to ArcelorMittal. In order
           to demonstrate the commitment of ArcelorMittal to BEE
           and contribute towards the social upliftment of black
           people, it is intended that a minimum of 60% of the
           economic benefits attached to the ArcelorMittal
           shares, which will be the subject of the Scheme, must
           accrue to Scheme beneficiaries who are black persons
           (as such term is defined in the BBBEE Act, as read
           with the Codes). It is furthermore intended that the
           economic benefits attaching to the Scheme which will
           accrue to black beneficiaries will amount to 15% more
           than   the  economic   benefits  to   which  non-black
           beneficiaries will be entitled.

      1.2. The purpose of the Scheme is also to create meaningful
           wealth for approximately 9 000 ArcelorMittal Group
           employees.

      1.3. The lifespan of the Scheme will be five years from its
           implementation, which is envisaged to occur on 1
           October 2015.

      1.4. It is proposed that the Scheme be implemented through
           the mechanism of the Trust, which will hold the
           ArcelorMittal shares that are the subject of the
           Scheme.   The Trust will issue trust units (“Trust
           Units”), each of which will be notionally linked to
           one ArcelorMittal share held by the Trust. The
           ArcelorMittal shares will at the outset of the Scheme
           constitute 4,7% of the issued share capital of the
           Company and will be sourced from treasury shares(“the
           Sale Shares”) held by Vicva Investments and Trading
     Nine Proprietary Limited (“Vivca”), at the cost of the
     Company.   For such purposes, the Company will make a
     monetary contribution to the Trust. It is also
     envisaged that the Company may make future monetary
     contributions to the Trust to fund the cost of
     operating the Trust and/or to cover ad hoc voluntary
     distributions to the qualifying employees who become
     beneficiaries of the Trust etc.

1.5. The Board must from time to time identify the
     employees who qualify to participate in the Scheme. In
     this regard, permanent employees of the ArcelorMittal
     Group   who   fall   within   ArcelorMittal’s   middle
     management and lower employment grades (who would not
     qualify for participation in the Company’s long term
     incentive plan for senior management), would qualify
     to participate in the Scheme, provided they are “new
     entrants” as contemplated in the Codes and are not
     serving their notice period.

1.6. In order to meet the BEE objectives as set out in
     paragraph 1.1 when the first allocations are made, all
     black Qualifying Employees who do not reject the
     allocation made to them will qualify for 2 250 trust
     units, whilst all non-black qualifying employees who
     do not reject the allocation made to them will qualify
     for   1  950   Trust   Units.   Allocations   are  made
     irrespective of the employment grading of qualifying
     employees.   It    is   accordingly    envisaged   that
     approximately 18 900 000 out of the total of the
     21 103 219 ArcelorMittal shares initially acquired by
     the Trust will be linked to the first allocation of
     Trust Units.    Future allocations will be made, for
     example, in the case of new appointments or when
     additional   allocations    need    to   be   made   to
     beneficiaries who are black persons so as to ensure
     that the BEE requirements determined for the Scheme
     are adhered to.

1.7. The Trust will not be controlled by the Company, so
     that the JSE will permit the voting rights exercisable
     at meetings of ArcelorMittal shareholders on the
     ArcelorMittal shares held by the Trust to be taken
     into account during the lifespan of the Scheme in
     respect of all resolutions taken thereat.    The Trust
     Deed accordingly makes provision for three, out of the
     six Trustees that are required to be in office (after
     the   beneficiaries  have   ran  the   nomination  and
     appointment process prescribed by the Trust Deed), to
     be elected and appointed from the ranks of the
     beneficiaries. The Company will have the right to
     appoint one Trustee and the other two Trustees must
     then be elected by such three beneficiary appointed
     trustees as well as the Company appointed trustee,
     from a list, provided by ArcelorMittal, of candidates
     who are independent of the ArcelorMittal Group and the
     Trust.
2.   KEY FEATURES OF THE SCHEME

     Other key features of the Scheme are as follows:

     2.1. each Trust Unit will be subject to an incentive
          period, a period that commences on the date of
          allocation thereof and expires on 30 September 2020
          (“Expiry Date”), subject to the terms of the Trust
          Deed;

     2.2. qualifying employees are not required to      pay   any
          consideration   for   their   Trust   Units   or    the
          ArcelorMittal shares related thereto;

     2.3. as beneficiaries of the Trust, these qualifying
          employees will be entitled during the lifespan of the
          Scheme (or from the time they become beneficiaries, in
          the    case   of    future   allocations)   to    share
          proportionately in the net income derived from the
          ArcelorMittal shares that will be the subject of the
          Scheme.   Furthermore, at the end of the Scheme, when
          the capital entitlement vests, the beneficiaries will
          have the option of either having the ArcelorMittal
          shares   notionally   linked  to   their  Trust   Units
          transferred to them, thereby acquiring a direct
          interest in the equity of ArcelorMittal, or to receive
          the net proceeds derived from the sale of such shares;

     2.4. termination of employment for reasons of a fault
          termination (i.e. resignation, misconduct etc.) prior
          to the end of the incentive period will result in that
          beneficiary forfeiting all his/her Trust Units and
          he/she will have no further claim to any Trust income
          or any trust capital in relation to his/her forfeited
          Trust Units;

     2.5. termination of employment for reasons of a no fault
          termination (i.e. retirement, retrenchment etc.) prior
          to the end of the incentive period will result in a
          proportionate participation in the Scheme, in that the
          beneficiary will be entitled only to the portion of
          the Trust Units allocated to them calculated with
          reference to and in the same proportion that the
          number of days of the incentive period up to the
          employment termination date bears to the total number
          of days in the incentive period. The remainder of the
          Trust Units allocated to them will immediately be
          forfeited. In the case of termination due to death
          however, a contribution will be made as described in
          paragraph 4.2;

     2.6. during the incentive period, the beneficiaries will
          not be entitled to sell, transfer or otherwise dispose
          of or encumber their Trust Units and/or the right to
          capital or income, or any other right in terms of the
          Trust Deed, other than by way of the forfeiture or
          cancellation thereof in accordance with the terms of
          the Trust Deed;
     2.7. The Scheme will terminate on the Expiry Date but may,
          however, at any time be terminated sooner by the
          Trustees   by   unanimous    resolution,   subject  to
          ArcelorMittal’s   prior   written   approval,   or  by
          ArcelorMittal on written notice to the Trustees. Upon
          termination of the Scheme all Trust Units that are not
          allocated to beneficiaries, must be allocated by the
          Trustees to the beneficiaries at that time in
          proportion to the Trust Units allocated to them and in
          accordance with the principle that 60% of the economic
          benefits must accrue to beneficiaries who are black
          persons. The beneficiaries will have the option of
          either having the ArcelorMittal shares then notionally
          linked to their Trust Units transferred to them,
          thereby acquiring a direct interest in the equity of
          ArcelorMittal, or to receive the net proceeds derived
          from the sale of such shares.

3.   THE DISPOSAL

     3.1. Vicva has agreed to sell the Sale Shares to the Trust.
          The disposal will not take place at the market value
          per ArcelorMittal share, but rather at a consideration
          of R87,86 per ArcelorMittal share. The reason for the
          sale at a premium to market value is that Vicva
          acquired the Sale Shares at R87,86 per share during
          2009 using a loan from ArcelorMittal and is indebted
          to settle this loan.     The total purchase price is
          accordingly R1 854 128 821.    The contribution to be
          made by ArcelorMittal to the Trust must be applied in
          payment of the purchase price of the Sale Shares to
          Vicva. Vicva is obliged to apply the money as
          settlement of Vicva’s indebtedness to ArcelorMittal
          and pursuant thereto ArcelorMittal will be in a cash
          neutral position despite having made the Initial
          Contribution.

     3.2. As the Sale Shares are held by Vicva as treasury
          shares, the disposal thereof to the Trust will be
          required to comply with the provisions of the Listings
          Requirements governing a specific issue of shares for
          cash.

4.   FINANCIAL ASSISTANCE RELATING TO THE SCHEME

     4.1. ArcelorMittal has undertaken to make the contribution
          to the Trustees once the last of the conditions
          precedent to the contributions agreement concluded
          with the Trust are met. The Trustees will be obliged
          to utilise and apply the contribution to pay the
          purchase price for the Sale Shares owing to Vicva
          pursuant to the disposal.   The Trustees will have no
          obligation to repay any portion of the contribution to
          ArcelorMittal.

     4.2. ArcelorMittal will also be obliged to make          a
          contribution to the Trust in the event of           a
          beneficiary’s death prior to the end of the incentive
          period. The Trustees will determine the market value
          of the ArcelorMittal shares notionally linked to a
          portion   of  the   Trust  Units  allocated   to  the
          beneficiary and ArcelorMittal will be obliged to make
          a contribution to the Trust in such amount, which
          money the Trustees will be required to us to make a
          payment to the deceased beneficiary’s estate as
          compensation for the cancellation of such portion of
          Trust Units.

     4.3. ArcelorMittal is also liable to pay all reasonable
          costs, expenses and tax of the Trust, including the
          fees payable to its auditors and the amounts due and
          payable in accordance with the agreement whereby an
          administrator is to be appointed to administer the
          Trust (including the administrator’s fees). It has
          also agreed to pay any other administration costs
          which have been approved by ArcelorMittal in writing
          in terms of the Trust Deed. ArcelorMittal shall also
          provide to or procure for the Trust, all secretarial,
          accounting, audit, administrative and legal services
          at no charge.

     4.4. ArcelorMittal   is   entitled  to   make   additional
          contributions to the Trust from time to time, in its
          sole and absolute discretion.

     4.5. There may also be financial assistance provided by
          ArcelorMittal to the beneficiaries through their
          participation in and benefitting from the Scheme.

     4.6. The approval of ArcelorMittal shareholders by special
          resolution will be required in respect of the making
          by ArcelorMittal of the contributions, to the extent
          that the making of the contributions by ArcelorMittal
          may   constitute  financial    assistance granted   by
          ArcelorMittal to the Trust and/or qualifying employees
          in terms of the Companies Act.

5.   PRO FORMA FINANCIAL INFORMATION

     5.1. The pro forma financial information is presented in
          accordance with the provisions of the Listings
          Requirements and the Guide on Pro Forma Financial
          information issued by the South African Institute of
          Chartered Accountants.

     5.2. These   pro    forma   financial   effects   are    the
          responsibility of the directors of ArcelorMittal.

     5.3. The pro forma financial effects are presented in a
          manner consistent with the basis on which the
          historical financial information of ArcelorMittal has
          been presented and in terms of ArcelorMittal’s
          accounting policies for the financial year ended
          31 December 2014.   The pro forma financial effects
          have been presented for illustrative purposes only
          and, because of their nature, may not give a fair
              reflection of ArcelorMittal’s            financial position,
              changes in equity or results             of operations post
              implementation of the Scheme.

        5.4. It has been assumed for purposes of pro forma
             financial effects that the Scheme took place with
             effect from 1 January 2014 for the statement of
             comprehensive income purposes and on 31 December 2014
             for the statement of financial position purposes.

        Pro forma per      share   information   for       the    year   ended    31
        December 2014

        The pro    forma   financial   effects   of    the       Scheme    are    as
        follows:

Column                                                 A                       B
                                                           Before           Pro forma       %
                                                                            after the    Change
                                                                                 ESOP
                                                                 Rm                 Rm
Loss per share (cents)                                       (39)                 (54)    -38%
Diluted loss per share (cents)                               (39)                 (54)    -38%
Headline loss per share (cents)                              (57)                 (71)    -25%
Diluted headline loss per share (cents)                      (57)                 (71)    -25%
Net asset value (NAV) per share (cents)                     5 165                5 163     0%
Tangible net asset value (TNAV) per
share (cents)                                          5 131                    5 129      0%
Total number of shares in issue                  401 201 877              401 201 877      0%
Weighted average number of shares in
issue                                            401 201 877              401 201 877      0%
Diluted weighted average number of
shares in issue                                  401 201 877              401 201 877      0%


NOTES

(i)      Column A has been derived without adjustment from ArcelorMittal’s
         audited consolidated financial statements for the year ended 31
         December 2014.

(ii)     Column B illustrates the pro forma financial effects after the Scheme
         which takes into account the following
            - Estimated IFRS 2 charge of R72 million calculated as the fair
               value of the Sale Shares spread over the vesting period of 5
               years. The fair value per share at inception of the Scheme is
               assumed at R17.
            - Estimated once-off transactions costs of R4 million.
            - Estimated net tax credit calculated at 28% on the estimated IFRS
               2 charge of R72 million, transaction costs of R4 million as well
               as the securities tax payable by a group entity of R5 million
               calculated at 0.25% of R1 854 million on sale of the Sale Shares
               to the Trust. These tax adjustments are of a non-continuing
               nature.
(iii)    The weighted average number of shares in issue remained the same as the
         Trust will be consolidated and the shares treated as treasury shares
         until vesting.
6.   CIRCULAR TO SHAREHOLDERS

     The sale of the Sale Shares constitutes a specific issue of
     shares for cash from a JSE Listings Rules perspective and
     therefore requires shareholder approval to be implemented.
     Furthermore, the making of the contributions described in
     paragraph 4 by the Company could constitute the provision
     of financial assistance by the Company. Accordingly a
     circular will be mailed to shareholders in due course to
     convene the general meeting of ArcelorMittal shareholders
     at which the requisite resolutions will be proposed.



31 July 2015


Sponsor to ArcelorMittal South Africa Limited
J.P. Morgan Equities South Africa Pty Ltd
Legal and Tax adviser to ArcelorMittal South Africa Limited
ENSafrica
Independent Reporting Accountants and Auditors
Deloitte & Touche


For further information please contact:
Themba Nkosi, General Manager
Tel: (016) 889 2996 or
Kesebone Maema, Manager Corporate Communications
Tel: (016) 889 2425

Date: 31/07/2015 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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