Italtile seals R700m empowerment deal

Ceramic tiles, sanitary-ware and bathroom accessories retailer Italtile has wrapped up its empowerment deal and is hopeful that it will open doors into market segments in which the group has not previously traded.

The company, which retails local and imported products, said a December amendment to the Companies Act had made it possible for it to finance the purchase of its own shares in what is believed to be the first such deal under the amended act.

Financial director Peter Swatton said the company had always traded in the residential and small commercial segments of the market but with equity partners on board it now hoped to break into government and quasi-government territory and was investigating a few transactions.

The deal, which has been effective for less than a month, saw a consortium buy 10,7% of Italtile for R700m. Italtile originally expected to have the deal wrapped up by August, but it could not proceed until the act was amended.

The empowerment partners are Mafumbuka Investment Holdings and Aka Capital. Mafumbuka, which is led by Spoornet CEO Siyabonga Gama, consists of a trust, individual shareholders and the Ingcucuce Women's Organisation.

Aka Capital is led by Reuel Khoza, Nedbank's independent chairman.

The parties, which would be locked in for seven years, would not see economic benefits from day one.

However, benefits would accrue sooner than deals financed through financial institutions, Italtile said.

Gama, a non-executive director at Italtile, was expected to continue his duties at Spoornet. Khulu Ntshingila, a fellow partner at Mafumbuka, is already a member of Italtile executive management.

Aka Capital CEO Sam Nematswerani, will be a non-executive director at Italtile, with Gary Morolo as his alternate director. Swatton said when the deal was announced that the company sought partners who understood the industry.

“We wanted people who spoke the same language,” he said.

The company's first deal, two years in the making, could be followed by other equity sales within the group, said Swatton.

Source: Business Day

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