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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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