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Woolworths would sell 10 percent of its shares to about 17 000 of its black employees through a black economic empowerment (BEE) transaction, the listed retailer said yesterday.

May 22, 2007

By Tonny Mafu

Johannesburg – Woolworths would sell 10 percent of its shares to about 17 000 of its black employees through a black economic empowerment (BEE) transaction, the listed retailer said yesterday.

The deal, which is expected to cost the company R292 million, is meant to bring in black investors as shareholders.

Woolworths said that for the half-year to December 2006, the effect of the BEE deal would be a reduction of 7.7 percent on headline earnings per share of 64.8c, assuming the transaction took effect on 1 July last year.

Under the scheme, the retailer will issue convertible, redeemable, non-cumulative participating preference shares with a face value of 0.15c.

The company said a maximum of 89.4 million shares would be issued at appropriate times to the Woolworths Employee Share Ownership Trust, which would hold the shares over the eight-year term of the scheme.

At the end of the scheme’s term, the preference shares would be converted to ordinary shares on a one-to-one basis.

Beneficiaries would have the choice to keep or sell shares.

According to the company, a key consideration in putting together the BEE staff share ownership scheme was to reward long-term service and encourage staff retention. The deal also fitted in with the demographic composition of its employees – with 90 percent being black and 85 percent women – and the the role they would play in the future growth of the retailer.

It added that because of their sound knowledge of the group’s operations, employees were in the best position to participate in and add value from the commencement of the BEE transaction.

Edgars Consolidated Stores (Edcon), which was recently delisted from the JSE after a R25 billion buyout by Bain Capital, also involved employees in a R445 million empowerment deal in 2005, in which 10.6 percent of the shares were transferred to an employee trust.

Vuyo Jack, chief executive of empowerment rating firm Empowerdex, then said involving employees in BEE deals helped address the concern that the empowerment exercise was enriching a few individuals.

In both the Edcon and Woolworths deals, employees benefiting from the transactions would have representation through trustees chosen by them.

Woolworths shares fell 0.78 percent to R23 yesterday, while the general retail sector lost 0.37 percent.

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