Wrap Text
Announcement regarding the settlement agreement concluded with the South African Government
Murray & Roberts Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1948/029826/06
JSE share code: MUR
ISIN: ZAE000073441
(“Murray & Roberts” or “the Company”)
ANNOUNCEMENT REGARDING THE SETTLEMENT AGREEMENT CONCLUDED WITH
THE SOUTH AFRICAN GOVERNMENT
Shareholders are advised that the Board of Murray & Roberts (the Company) has resolved
to participate in the settlement agreement (the Settlement Agreement) between the
Government of the Republic of South Africa (the Government) and seven construction
companies (collectively, the Construction Companies), which was announced on 11
October 2016. The Construction Companies had five business days from the date of
announcement to confirm their participation. The Settlement Agreement settles the
Construction Companies’ exposure to potential claims for damages from identified public
entities (the Claims) arising primarily from the fast track settlement process launched by the
South African Competition Authorities in February 2011 (the Fast Track Settlement
Process), and creates initiatives to further advance the transformation of the South African
construction sector. A key outcome of concluding the Settlement Agreement is that it will
enhance the relationship between Government and the construction industry, which the
parties to the Settlement Agreement acknowledge is critical in the current economic climate.
SETTLEMENT AGREEMENT WITH THE SOUTH AFRICAN GOVERNMENT
Following an extensive period of negotiation, the Government and the Construction
Companies concluded the Settlement Agreement, which addresses outstanding legacy
issues and commits to initiatives which will ensure the positive repositioning of the South
African construction sector. All parties to the Settlement Agreement acknowledge the need
to foster a better relationship between the Government and the industry going forward.
1. The Settlement Agreement
1.1 In summary, the Settlement Agreement stipulates that:
(a) Payments:
Over the next 12 years, the Construction Companies will be required to make
a collective, annual payment of R125 million into a fund (the Fund). In the
case of the Company, the annual payment amounts to R21,25 million. The
Fund will be constituted as a trust (Trust), which will be administered by an
agency appointed by National Treasury. The first annual payment by the
Company of R21,25 million will be payable in two tranches following the
1
Settlement Agreement becoming binding, and thereafter, each subsequent
annual instalment will be payable on 1 July of each year to 2027.
The Settlement Agreement is conditional on SANRAL withdrawing its claims
against the Construction Companies, where after it becomes binding.
(b) Application of payments to the Fund:
The Trust will use the payments made to the Fund for the further development,
enhancement and transformation of the construction industry, as well as the
promotion of social infrastructure for all South Africans. Initiatives will include
the development and advancement of construction companies owned and
managed by black people, the provision of bursaries for black students, and
providing support for learning institutions through bursary programmes and
infrastructure development. The initiatives also include funding the appointment
of professionals to provide Government with engineering, project management
and other services.
The Trust shall be co-governed by Trustees appointed by Government, the
Construction Companies and the South African Forum of Civil Engineering
Contractors.
(c) Settlement of Claims:
Any Claims for damages in relation to projects, primarily arising before and
from the Fast Track Settlement Process, the identified public entities would be
entitled to make against the Construction Companies, are settled.
(d) Development initiatives or disposal of a meaningful interest in the
construction business to an emerging contractor:
The Construction Companies have also individually undertaken to either:
(i) implement initiatives with the aim of identifying, developing and
mentoring up to three emerging contractors (Emerging Contractors),
to ensure that such Emerging Contractors will have the necessary
skills and quantity of work required to generate a cumulative combined
annual turnover equal to at least 25% of the annual construction works
turnover of the relevant Construction Company by year seven.
Aligned to this obligation are fixed interim annual turnover targets on
each Construction Company, as well as penalties calculated in
accordance with a formula, for a failure to meet such annual targets; or
(ii) to dispose of an economic interest of not less than a 40% in their
respective South African civil engineering and general building
construction businesses, to enterprises that are more than 51% black
owned, managed and controlled, in which case the relevant
Construction Company will be released from the obligation set out in (i)
above.
As previously announced, the Company is in negotiations with a prospective
buyer relating to the potential disposal of 100% of the Company’s
infrastructure and building businesses to a black-owned purchaser and will be
exiting the general building and civil engineering sector. Negotiations are at
an advanced stage.
(e) Limitation of liability:
2
(i) The total liability of a Construction Company arising from its annual
contribution payments in 1.1(a) above; and from any potential
penalties in 1.1(d)(i) above, shall not exceed 29% of the Construction
Company’s market capitalisation as at the signature date of the
Settlement Agreement.
(ii) Murray & Roberts’ market capitalisation for the purpose of determining
this limit of liability is R4,6 billion. However, the Company does not
envisage its financial exposure in terms of the Settlement Agreement
will exceed its aggregate contribution payment of R255 million over 12
years.
(f) Integrity Commitment:
All the Construction Companies have committed to an integrity undertaking, in
terms of which sound ethical and legal principles are adopted, and will be
encouraged across the industry.
1.2 Benefits of concluding the Settlement Agreement
(a) Further enhancing transformation in the South African construction sector.
(b) Construction Companies will be able to focus on their businesses as opposed
to engaging in lengthy, costly and protracted litigation.
(c) Creating and promoting black-owned and managed construction companies.
(d) Enhancing innovation in the sector.
(e) Providing closure for Construction Companies on the legacy matters dealt with
by the Competition Authorities, and giving certainty to stakeholders that any
Claims from identified public entities, as well as the associated litigation costs
and disruptions to operations, are avoided. Importantly, by concluding the
Settlement Agreement, the construction sector in South Africa will be a more
sustainable and competitive industry, as a partner to Government for the
advancement of infrastructure development in South Africa and for all South
Africans.
(f) Should any Claims (and settlement thereof) be successful and brought against
the Construction Companies following conclusion of the Settlement Agreement,
in relation to those public entities specifically identified in the Settlement
Agreement, then those settlement awards will be set off against the financial
contributions due in terms of 1.1(a) above.
1.3 Outstanding civil claims
The Settlement Agreement settles all Claims by identified public entities. The
Construction Companies will still be exposed to any claims brought by state-owned
enterprises and public entities that are not covered by in the Settlement Agreement.
3
2. Financial implications
The financial impact of the Settlement Agreement for Murray & Roberts is a charge of
R255 million over 12 years of which the present value of approximately R170 million
will be accounted for in the current financial year.
In conclusion, this arrangement signifies the Government and Construction Companies’
commitment in promoting sustainability, transformation and development in the construction
sector.
Bedfordview
13 October 2016
Sponsor: Deutsche Securities (SA) Proprietary Limited
4
Date: 13/10/2016 12:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
