BASIL Read has concluded a R521m broad-based black economic empowerment (BBBEE) agreement with Sishen Iron Ore Company Community Development Trust Investment Holdings.
This will result in Sishen Iron Ore Company (SIOC) holding an effective 25,1% in the Johannesburg-listed construction company.
Basil Read, a level-three contributor in terms of empowerment codes, will also improve its BBBEE rating to level two by way of the deal.
It said it recognised the importance of transformation, and entered the transaction with partners who would share in the appreciation of its share price.
"The transaction will enhance our existing BBBEE ownership credentials and complement our non-ownership elements of the Department of Trade and Industry codes," CEO Marius Heyns said on Thursday.
Basil Read said it shared a common vision with SIOC regarding the growth of African mining, and a strategic partnership might benefit infrastructure development within local communities and help boost its order book.
The total value of the transaction was R521,1m, of which R99,3m would be in cash and R421,8m in vendor funding.
The deal is expected to give Basil Read an effective 36% BBBEE equity ownership, of which 11% is not subject to any lock-in provisions.
The group said it had undertaken to vendor fund the balance of the transaction in the interests of complying with the spirit of the empowerment codes, and the aim of achieving a simple and tax-effective structure.
The transaction is based on a four-year lock-in period, with an option to extend for one year.
The trust was established in 2006 during the unbundling of Kumba resources into two companies, Kumba Iron Ore and empowered coal and heavy minerals company Exxaro.
Kumba Iron Ore, which owns 74% of SIOC, funded the purchase of SIOC shares by issuing R458m in preference shares.
The rest of SIOC is owned by Exxaro, the SIOC Employee Share Participation Scheme and the trust.
This is to benefit communities around the Sishen, Sishen South and Thabazimbi iron-ore mines in the Northern Cape and Limpopo provinces.
More than 300000 black families are beneficiaries of the trust, the sole beneficiary of 3% of the ordinary shares in SIOC.
These shares will be redeemed over time using the dividend flows from the shareholding.
Michael Dale of Deloitte Corporate Finance said his team had created a "simple, tax-efficient structure with a meaningful equity contribution and vendor funding on commercial terms".
Connie Molusi, chairman of both the trust and the SIOC board, said the investment reflected the trust's commitment to preserve and grow the balance sheet of beneficiary communities over the next seven to 10 years.