It's another black empowerment deal, yes. But this one has something a little different that is worth noting.

Transport and logistics company, Super Group, has agreed to sell 25,1% of its business to empowerment group, Peu Investment in a deal valued at R1-bn.

The interesting – and unusual - thing about the way it is structured is that if Peu adds enough value to Super Group, it will only have to pay for a small portion of the total number of shares it ends up with.

Through its structure, the deal addresses two often-criticised elements of empowerment deals: First, it provides Peu with an ability to decrease the amount of financing it will have to come up with to take ownership of the shares in four years; and second, it encourages them to actively participate in the company and help drive new business themselves.

According to the terms of the deal, Peu will convert its existing 30% investment in Super Group’s subsidiary, Fleet Africa, into ordinary shares (about 1,6% of Super Group) and unlisted “A” shares. The ordinary shares will be issued at a price of R8,94 – a 15% discount to the 60-day volume weighted average number of shares traded on the JSE.

Peu will then use a R300-m loan from the IDC to buy additional Super Group shares and will pledge these, along with the ones converted from its Fleet Africa stake, to the IDC as security for the loan.

In the third leg, Super Group will issue additional “A” shares to Peu, with the total number of “A” shares equivalent to 15,7% of Super Group. These shares will be converted into ordinary shares in four years time at a strike price of R13,15.

According to the deal, however, Peu can either simply pay R13,15 to convert their “A” shares in four years time, or they can basically pay the shares off by bringing in new business before then.

Provided the new business can be directly attributed to having been facilitated by Peu, the company will be able to “earn-in” on its Super Group stake. The amount of “earn-in” will be based on the value of new business calculated on a predetermined formula, says Super Group.

Another recent transaction - an empowerment deal by Altron - saw the company insisting that the empowerment consortium sign a detailed service level agreement guaranteeing that it would bring its promises to fruition. This was in an effort to formalise what the value-add would be and ensure that a contribution was made to the business - in return for a smaller debt to pay off for its stake.

According to Super Group spokesperson, Karen Bell, Peu has always been hands-on in the past. They had a similar ‘earn-in’ arrangement for the Fleet Africa stake, which she says was fully paid for and worked very well. “Peu have been instrumental in the phenomenal growth in the (Fleet Africa) business”.

At group level, Peu will now have the right to appoint 25% - 30% of Super Group’s board of directors and participate on all committees that influence the operations and strategies of Super Group. “We need someone involved who wants it to happen, and Peu really want it to happen,” said Bell.

Super Group has chosen to issue “A” shares instead of ordinary shares, says Bell, because ordinary shares are expensive to issue and must be serviced from day one. In addition, by using the unlisted “A” shares, Peu can be locked in for the four-year period. They will have full voting rights from the shares, but will not receive any dividends until they are converted into ordinary shares.

Super Group has already canvassed several of its major institutional shareholders for their views on the deal and has received their approval in principle, it says.

Super Group CEO, Larry Lipschitz, said the deal will position the group for participation in new public and private sector opportunities. And as a result of these opportunities, he believes that Super Group shareholders will benefit materially from the subsequent earnings growth.

Lipschitz adds that 10% of Super Group’s shares (part of the 25,1% stake) have been set aside for the benefit previously disadvantaged Super Group employees. It was in fact a condition of the IDC loan to Peu that all new and existing black staff be incentivised.

Peu is a black owned and managed investment holding company led by Peter Malungani. It’s shareholders consist of four trusts, including the Peu Staff Share Trust. Two of the others are discretionary trusts, which were established with the aim of broadening the equity participation in the company. “Through these trusts, Peu facilitates the development of black entrepreneurs and community projects that are broad-based and developmental in nature” says Super Group.

Peu also took part in another empowerment deal in May last year where it acquired 25,1% of Investec’s local business together with Tiso and an employee share trust. Peu is also associated with Capital Alliance, Abil, Primedia, Highveld Steel and Phumelela among others.