Sappi Limited · JSE:SAP

Sappi — Merger or Acquisition (March 2010)

23 slides from Sappi's merger presentation, Mar 24, 2010

  1. Slide 1: Sappi's Broad Based Black Economic Empowerment Transaction

    1 Sappi’s Broad Based Black Economic Empowerment Transaction 24 March 2010

  2. Slide 2: Agenda/ Content

    2 Agenda/ Content Sappi: Objectives The Transaction The Structure  ESOP  MSOP  Sappi Foundation Lereko: The restructured 2006 BEE Land Deal The Strategic Partners  Lereko Investments  Malibongwe  AMB Capital Conclusion

  3. Slide 3: Why this BEE transaction?

    Why this BEE transaction? 3 Enhance Sappi’s commitment to BBBEE and transformation Create a sustainable, robust and credible (truly broad- based) transaction Recognise the crucial role that Sappi staff play in company success Help to attract and retain staff, in particular highly skilled black m

  4. Slide 4: Why this BEE transaction?

    Why this BEE transaction? 4 Restructure the 2006 BEE Land Deal with the strategic partners (Lereko; Malibongwe; AMB Capital) and further strengthen our relationship with them Build on Sappi’s commitment to its communities Move from Level 6 to Level 4 Contributor; 100% preferential procurement rec

  5. Slide 5: The transaction:

    The transaction: 5 Issue the equivalent of 4.5% of Sappi Limited share capital to achieve 30% empowerment of the South African business. The value of the transaction is R814 million. Create ±20 million of a new type of equity referred to as “A” Ordinary Shares to be held by 3 BEE Trusts for the be

  6. Slide 6: The transaction:

    The transaction: 6  Issue ±4,3 million fully paid up Sappi Limited Ordinary Shares to be held by the Strategic Partners and by the ESOP. The Strategic Partners will trade their interests in the 2006 BEE Land Deal (R102 m) for paid up Sappi Limited Ordinary Shares. This will give them 12,5% of the

  7. Slide 7: BBBEE Shareholding structure:

    BBBEE Shareholding structure: 7 Strategic Partners 0.57% Ordinary Shares: 643,227 Ordinary Shares: 1,971,693 Ordinary Shares: 432,842 AMB Capital Lereko Investments Malibongwe 0.12% 0.37% 0.08% "A"Ordinary Shares:13,889,195 "A"Ordinary Shares:3,642,969 "A"Ordinary Shares:2,429,312 Ordinary Shares: 5

  8. Slide 8: The empowerment participants:

    The empowerment participants: 8 Employees Strategic Sappi and partners Foundation management Employees (ESOP) R102m or 12,5% of the R81m or 10% of the R506m or 62.5% of the Deal deal Deal All employees* Strategic partners include: Sappi will use value regardless of race (77% •Lereko Investments; cre

  9. Slide 9: The Sappi Foundation Trust:

    The Sappi Foundation Trust: 9  Sappi Foundation will support Sappi communities and growers:  Natural BBBEE partner for Sappi.  Best mechanism.  Proceeds can also support productive capacity amongst grower communities.  Structure:  “A” Ordinary Shares will vest on day 1.  Trust will use income

  10. Slide 10: SA BBBEE Transaction – Size:

    SA BBBEE Transaction – Size: 10 • Current Market Capitalisation of Sappi R18,000 million • Sappi SA as a percentage of the Sappi Group 25% • Value of Sappi SA (25% x R18,000 million) R4,500 million Target size of BEE ownership at Sappi SA level 30% Mandated Investment Exemption 40% • Effective size

  11. Slide 11: Deal costs:

    Deal costs: 11 Deal costs include:  IFRS Share-based charge (non cash) R272m  Value of 2006 BEE Land Deal exchanged for shares R145m  Transaction costs R 15m

  12. Slide 12: Key parameters ESOP and MSOP:

    Key parameters ESOP and MSOP: 12 Who qualifies? • ESOP: All South African employees who do not currently participate in a Sappi share scheme • MSOP: All black managers (in addition to any participation they have in an existing Sappi share scheme) • Provision for new employees until 2016 • No minimum

  13. Slide 13: Key parameters ESOP and MSOP:

    Key parameters ESOP and MSOP: 13 Allocations • Allocations of “A” shares based on broad bands linked to Sappi’s employment grading system • The Ordinary Shares arising from the 2006 BEE Land Deal will be distributed equally amongst qualifying employees • Managers do not get any Ordinary Shares as th

  14. Slide 14: Key parameters ESOP and MSOP:

    Key parameters ESOP and MSOP: 14 What benefits will flow to the employees? • Full voting rights in respect of the shares held from the start • 100% of the dividends on the “A” shares to “A” shareholders • All dividends paid out from the start (if company declares a dividend) • Capital upside above h

  15. Slide 15: The 2006 BEE Land Deal:

    15 The 2006 BEE Land Deal: Lereko AMB Sappi Investments Malibongwe Workers Capital Interest 46,19%* 10,14%* 30%* 13,67%* Lereko Property Consortium (LPC) 25% of Sappi’s plantation land And right to develop * = effective entitlement to value from the 25%

  16. Slide 16: Background on BEE Land Deal:

    Background on BEE Land Deal: 16 In April 2006 Sappi concluded a BBBEE deal with LPC: • LPC comprised Lereko Investments, Malibongwe Women Development Trust and AMB Capital • LPC acquired a 25% economic interest in Sappi’s South African plantation land coupled with the right to develop land not utili

  17. Slide 17: Future of the BEE Land Deal:

    Future of the BEE Land Deal: 17 The land ownership will revert back to Sappi. Sappi and LPC will create LPC II to spearhead future property development. Sappi will establish the Sappi Workers Trust which will hold 30% of LPC II for the benefit of all current (and future) Sappi SA employees who do

  18. Slide 18: Future of the BEE Land Deal:

    Future of the BEE Land Deal: LPC Consortium LEREKO AMB MALIBONGWE SAPPI SAPPI INVESTS CAPITAL TRUST WORKERS Sappi “flip –up” LPC’s 25% interest in Sappi land (R145m) for Sappi shares LPC 100% owned LPC sells development LPC II by Sappi rights to LPC II SAPPI LAND 100% Sappi Sappi & LPC II jointly ha

  19. Slide 19: Lereko Investments:

    Lereko Investments: 19  An empowerment company committed to participating in the ongoing transformation of the South African economy  Participates in value-adding, sustainable black empowerment transactions  Draws on the experience and background of its shareholders in identifying sectors in whic

  20. Slide 20: Malibongwe Women Development Trust:

    Malibongwe Women Development Trust: 20  A not-for-profit NGO working on social and economic upliftment and empowerment of South African women  In operation since 1989 with a beneficiary base in excess of 10,000 women  Invested in a number of empowerment transactions in South Africa including Impe

  21. Slide 21: AMB Capital:

    AMB Capital: 21  A specialist financial services company offering a suite of niche services within the South African financial services environment  Specialist structuring and developmental skills for benefit of development companies  Over 50% empowered

  22. Slide 22: Conclusion: R810 million BBBEE transaction

    Conclusion: 22 R810 million BBBEE transaction Sappi SA 30% empowered All employees Strategic partners Communities through the Sappi Foundation

  23. Slide 23: Slide 23

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