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South African insurer Momentum Metropolitan Holdings Ltd. and Absa Group Ltd. have agreed to fund a share ownership program in which 3% of the insurer’s shares will be offered to black employees.
Momentum staff will acquire 44.9 million common shares as the company seeks to align its ownership with the demographics of its customer base, the company said Friday.
The empowerment transaction is one of the methods South African companies use to reorganize stocks after the country’s apartheid system channeled most of the wealth to white South Africans, to the detriment of black South Africans.
The deal will be financed by issuing preferred shares through a special purpose vehicle for Momentum and Absa, for up to R700 million ($ 42 million) and R350 million respectively, Momentum said.
About 26.9 million shares are in Momentum’s treasury and about 18 million will be purchased on the open market, he said. The shares will be held by the iSabelo Trust, which is being established until manage transactions.
Up to 20% of the trust’s distributable income, excluding special distributions, is paid to staff until the special purpose vehicle is no longer a beneficiary. Shareholders will vote on the plan on November 26
The program units will be assigned as follows:
- 85% of the program’s income will go to black employees and at least 55% to black employees;
- Staff eligibility to participate will be determined by instructions established by Momentum;
- The shares will be subject to a maximum period of acquisition of rights of seven years and will be redeemable once a period of 10 years has elapsed after their initial allocation;
- The plan is for the program to have a maximum duration of 15 years.
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