BIDVEST ’s black economic empowerment partner Dinatla has managed to clear all the debt it incurred from its purchase into the catering and packaging company eight years ago, but in that time its shareholding has shrunk to 4,5% from 15% in 2003.

The dilution is typical of most of these empowerment transactions because of funding constraints, Ajay Lalu, MD of Black Lite Consulting, said in an interview yesterday.

The dividend yield on average on the local bourse at its peak over the past 10 years was 5%, but the interest rate’s average was 10%, he said. "So there’s already a shortfall ... this is typical of what one would expect," Mr Lalu said.

Bidvest bought back 12-million of its shares from Dinatla in a deal worth R1,6bn , it said in a statement to the JSE yesterday.

The deal "leaves our (empowerment) partners totally unencumbered, and they can receive the full benefit from dividends", Bidvest financial director David Cleasby said.

Dinatla refinanced the deal three years after it was first announced, which had also diluted its stake.

Dilution is "not an unusual phenomenon" in these deals, Tania Slabbert, CEO of WDB Investment Holdings, the lead company in the Dinatla consortium, said. "There is no perfect black economic empowerment funding structure," she said.

The deal, when it was initially announced, was heavily criticis ed as Dinatla struggled to raise funding and ended up using a much maligned share-based funding model.

In terms of a typical share- based funding scheme, an empowerment vehicle funds its acquisition of the shares through hoped- for capital growth and dividend distributions. But "this is still one of the better transactions; we’ve seen worse," Mr Lalu said.

The government has pressured businesses to increase black participation in the economy following the end of apartheid, by — among other measures — introducing blacks as shareholders.

"Unfortunately, most deals from the beginning of the last decade will end up diluted," Abri du Plessis, chief investment officer of Gryphon Asset Management, said. "It’s a big negative to how the transactions were structured."

Dinatla’s shareholders include Cyril Ramaphosa’s Shanduka Group. Mr Ramaphosa was appointed chairman.

With liabilities settled, shareholders will now be able to get full exposure to dividends, Ms Slabbert said.

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