SABMiller in R7.3bn SAB BEE deal

The deal, valued at R7.3 billion, or US$988 million, will result in 8.45% of its South African subsidiary, The South African Breweries Ltd, being held by a broad base of black participants, reflecting the group's longstanding and continuing commitment to socioeconomic progress in South African society.

Preliminary details of the BEE deal were first announced on 1 July 2009.

Eligible participants and share classification

Participants will include SAB's employees, black-owned licensed liquor retailers and retail liquor licence applicants, as well as registered black-owned customers of ABI, the soft drinks division of SAB ("Retailers"); and the broader South African community through a newly established SAB Foundation.

Under the transaction, The South African Breweries will issue three new classes of ordinary shares in SAB, in aggregate comprising 8.45% of SAB's enlarged issued share capital, to three separate investment entities, which will hold the interests of the participants.

SAB's employees will in aggregate hold 18 532 491 E ordinary shares, being 3.39% of SAB's enlarged issued share capital, through an employee share trust, the SAB Zenzele Employee Trust.

Retailers will in aggregate hold 19 228 250 R ordinary shares, being 3.52% of SAB's enlarged issued share capital, through an investment entity, SAB Zenzele Holdings Ltd and the SAB Foundation will hold 8 412 359 F ordinary shares, being 1.54% of SAB's enlarged issued share capital.

The transaction period is expected to be approximately 10 years, after which time the E and F ordinary shares, and the ordinary shares in SAB Zenzele will be acquired by members of the SABMiller Group, and participants will receive shares in SABMiller Plc which, broadly, will have an aggregate value linked, inter alia, to the operating performance of SAB during the Transaction Term.

First year dividends

The transaction will not require any external bank funding, and meaningful cash dividends are expected to be paid to participants from the first year.

By way of example, had the transaction been implemented on 1 April 2008, the aggregate amount of dividends payable to holders of the SAB shares would have been approximately R77 million in respect of the SAB financial year ended March 2009.

This amount, net of any costs and administration expenses, would have been distributed to transaction participants.

The transaction is subject to the fulfilment of certain conditions precedent.

Enhancing BEE compliance

SAB's compliance with the South African government's Codes of Good Practice on broad-based BEE will be materially enhanced through the transaction, the group said.

SABMiller believes that the transaction will support the normalisation of the South African liquor industry by supporting retail liquor licensing in South Africa, and, by seeking to promote sustainable economic growth and social development in South Africa, the transaction will align the interests of the group's South African stakeholders with SABMiller's shareholders, and will maximise long term shareholder value.

Graham Mackay, chief executive of SABMiller Plc, said: "The group's broad-based black economic empowerment transaction in South Africa further entrenches SABMiller's longstanding commitment to the country and its people, while at the same time enhancing the growth and profitability of the company."

Norman Adami, managing director of SAB, said: "SAB is proud to announce further details of this innovative transaction, once again demonstrating the company's determination to set new standards in societal leadership, make a significant contribution to its black employees and stakeholders and play its full part in the ongoing normalisation and regulation of the South African liquor industry.

The word Zenzele, which means "do it (for) yourself", epitomises the essence of what this transaction is all about the unquenchable desire to achieve personal improvement and growth".

Transaction value

SABMiller said although the transaction value is calculated as $988 million or R7.3 billion, the economic cost to the SABMiller group is calculated at approximately $279 million, or R2.1 billion.

The transaction is expected to become effective in the financial year beginning on April 1 2010, and as such will not impact the SABMiller group's adjusted earnings for the current financial year.

Under International Financial Reporting Standard 2 or IFRS 2, the deal will result in a share-based payment expense being reflected in the income statement of SABMiller over the transaction term, with the majority of this expense being charged in the financial year ending 31 March 2011.

Zenzele Employee Trust

The transaction is subject to the fulfilment of certain conditions, including the passing of the appropriate resolutions by the shareholders of SABMiller to approve the Scheme and the transaction, and to authorise the issue of new SABMiller shares and the establishment of The SAB Zenzele Employee Trust.

It is also subject to sanction by the High Court of Justice in England of the scheme, and the registration of SAB Zenzele, The SAB Zenzele Employee Trust and The SAB Foundation.

Subject to shareholder approval, it is expected that the SAB Zenzele offer to retailers will be launched, and the allocations in respect of all three categories of participants will be finalised, in the first half of 2010.

A meeting of SABMiller shareholders will be held at the direction of the Court of Justice in England on Wednesday, 13 January 2010 in London and a general meeting of SABMiller shareholders will be held immediately following the conclusion of the Court meeting, to consider and if deemed fit, pass, with or without modification, the resolutions required to approve the transaction, and to authorise the issue of new SABMiller Shares and the establishment of The SAB Zenzele Employee Trust.

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