Brimstone announced that its BEE deal with Nedbank Group Limited has matured. In 2005 Brimstone led a broad-based consortium in acquiring a shareholding in Nedbank (“the transaction”.)
Brimstone’s share of the transaction was an effective 0,61% of Nedbank at a market value of R198m at the time. The transaction was widely welcomed as a landmark BEE deal in that, for the first time, part of a BEE deal’s financial success would be linked directly to performance arrangements with specific measurable deliverables expected of the BEE partners.
Brimstone CEO, Mustaq Brey said,"Brimstone’s philosophy is premised on being profitable, empowering, and having a positive social impact. Using these three criteria alone in assessing the Nedbank deal, we can comfortably say that we have achieved in all three areas. The experience with Nedbank has been very positive. Partnering with excellent management; and working with the many great people in Nedbank has been rewarding for Brimstone and its consortium partner Mtha-we- Mpumelelo.”
Brimstone takes a long-term view on, and has a partnership approach to its investments. At the time the transaction was entered into, Nedbank traded at R74.75 and at 31 December 2014 (Brimstone’s latest reporting date) Nedbank closed at R249. In addition, Brimstone earned significant fees from Nedbank over the period as reward for out-performance in terms of the annually negotiated and monitored performance contract. The combination of share price growth, performance fees and dividends earned over the period resulted in the investment in Nedbank delivering an exceptional 76% IRR since inception. At 31 December 2014, the pre-tax value of the investment in Nedbank amounted to R576m or 7% of Brimstone’s intrinsic gross asset value.
Empowering relationship with a positive social impact
Brimstone executives played an active strategic role in various transformation initiatives within Nedbank over the last 10 years, including participation in staff development and mentoring. Aside from the mutually beneficial commercial (deal generation) element of the relationship between Brimstone and Nedbank and its different business units over the period, Brimstone and Nedbank have formed an enduring partnership in some of their corporate social investment initiatives. These include projects in the areas of education, poverty alleviation (feeding schemes), shelter and housing (including the winter warmth campaign and different housing initiatives) through mutual support of the work of the Brimstone Foundation and Nedbank Foundation.
Brimstone currently has in excess of 3 million beneficiaries. Its shareholder base includes 26 NGO’s spread across South Africa whose beneficiaries include the most vulnerable and marginalised members of society.
Fred Robertson, Brimstone Executive Chairman, added, “This year Brimstone celebrates its 20 year anniversary. Brimstone has established a track record of creating value for all its stakeholders. It has paid 13 annual cash dividends to its shareholders to date and when these dividends are paid they have a direct benefit to our many broad-based NGO shareholders. Investments like Nedbank make it possible for us to continue to deliver on our mandate, and enable us to have a real impact on society at large.”
Robertson adds that the maturity of this deal does not imply an end to Brimstone’s relationship with Nedbank. “Whilst the end of this transaction has been reached, Brimstone and Nedbank have already initiated discussions aimed at furthering the relationship between us.”
In this regard, in separate announcements this week Brimstone and Nedbank said that they had agreed to jointly make a financial contribution and commit resources to the development of entrepreneurs and job creation in rural and urban areas, in partnership with Old Mutual plc (“Old Mutual”,) Nedbank’s parent company. “The endowment of R100m created by Brimstone, Nedbank and Old Mutual will advance transformation, entrepreneurship and job and wealth creation in rural and urban areas.” says Robertson.
Nedbank’s CEO, Mike Brown, said, ”Our partnership with Brimstone has worked because we were jointly committed to building a commercially sound structure which added economic and transformational value to our respective businesses. Brimstone has been alongside us on our growth path for the past decade, generating successful funding and other deals for Nedbank, ranging from individuals to multi-billion Rand projects.”
“The relationship between Brimstone and Nedbank has been mutually beneficial at many levels. There are many other areas where we can and will continue to co-operate and work with Nedbank. The exact detail of these will be finalised soon,” concluded Brey.