Tourism and hospitality students and the group's own staffs are the major beneficiaries of the proposed R485-million BEE transaction.
"Contributing to the education of black students in the tourism and hospitality sector is an investment in the future of South Africa while empowering and retaining our own black staff is also a key consideration for staff motivation and skills retention within our group." said Hans Enderle, the group?s founder and non executive chairperson.
The group's BEE deal will include a Staff Trust, which will acquire a six percent stake in City Lodge Hotels (adding to the 1.7 percent of the group already held by a staff trust established in 1995), the University of Johannesburg' School of Tourism and Hospitality, which will acquire a three percent stake, and empowerment company Vuwa, which acquire a six percent stake.
While the overall transaction involves 15 percent of City Lodge's shares, black ownership of the group will rise to 22.4 percent if mandated investments, as defined by the DTI's BEE codes, are excluded from the existing shareholding structure.
Outlining the structuring of the transaction, Enderle said City Lodge and its advisers have spent the past year examining the most meaningful and creative way to improve the group's BEE credentials and at the same time make a substantial contribution to skills development and skills retention.
"The University of Johannesburg' School of Tourism and Hospitality has played a very important role in developing skills over many decades so we came up with a means to assist them to continue this role into the future," added Enderle, himself a graduate of a Swiss hotel school.
As part of the agreement relating to the university acquiring a three percent stake in City Lodge, it will receive a 10 percent "trickle dividend" that will be used annually to fund bursaries for historically disadvantaged black students. At least 85 percent of bursary recipients must be black, half of whom must be female.
Happy SmilesThe Staff Trust, in the form of the Injabulo Staff Trust (meaning happy smiles), will benefit eligible employees, including all current and future black and white employees who do not qualify to participate in the company's executive share incentive scheme. Around 75 percent of City Lodge staff are black.
"The City Lodge 10th Anniversary Employees Share Trust that we introduced in 1995 ? which was pretty ground-breaking at the time ? has proved to be such a success that we thought we would replicate and expand the model as part of our broad-based BEE initiative," added Enderle, stressing that this trust has enabled staff to realise the value of being shareholders in their own employer company through the receipt of regular share distributions and annual dividends.
Requiring approval from 75 percent of shareholders, City Lodge has proposed that the transaction takes the form of a court-sanctioned scheme of arrangement that will require existing shareholders to sell 15 percent of their holdings at the 10-day volume weighted average price measured back from 18 March, 2008. The share price for the transaction will be 76.06 rand compared to the current share price of around 74.50 rand.
Vuwa is an empowerment company led by Bulelani Ngcuka who is an 18 percent shareholder.
A scheme meeting of shareholders of City Lodge will be convened in June, with the scheme of arrangement being sanctioned by the court later in the month. The repurchase of shares is envisaged to take place to take place in July 2008.