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PROTEA OVERTAKES TOURISM CHARTER WITH 54% BEE DEAL - 04 July 2005
Protea Hospitality Corporation (PHC), has concluded a contract that will see 54% of the company's shareholding going to BEE partners. Following on from the initial BEE transaction that was implemented in 2001, this deal has been made possible through Actis and Comafin jointly disposing of their 37,5% stake in PHC. PHC, the holding company of Protea Hotels, sees this increased BEE shareholding as a natural progression and believes this to be the best way forward to ensure South Africa's Tourism Industry achieves true transformation. The 54% shareholding incorporates AKA Capital (headed by Reuel Khoza); POPCRU Investment Holdings (Pty) Ltd; and NAWA (National African Woman's Alliance). "This is a bold move for Protea, bringing the business more in-line with the demographics of South Africa and helping to ensure true economic empowerment," said Otto Stehlik, Executive Chairman of Protea Hospitality Corporation.
The 54% BEE shareholding pre-empts the Tourism Charter, which proposes that the hospitality and tourism industry's BEE scorecard aims for 30% by 2014. "With tourism beginning to play a significant role in South Africa's economy, it remains imperative that the industry move towards eradicating the indifferences sooner rather than later - bearing in mind that this is as much about sound business principles as about ethical values," added Stehlik.
AKA Capital, a black-owned private equity and investment holding group, is the largest BEE stakeholder in Protea. Reuel Khoza, chairman of AKA Capital, commented, "We believe the shareholding provides us with a solid platform to participate in the leisure and tourism sector, a sector in which we are well-placed to proactively add value, in a company run by a highly experienced, regarded and great management team."
Based on the impressive return on investment that was achieved in POPCRU's first acquisition of Protea shares in 2001, the organisation has now acquired additional shares. Mnikelwa Nxele, the investments director responsible for the Tourism and Hospitality interest said, "What we have also found highly impressive is the fact that the company has conducted its business in a manner that is truly compliant with the principles of Black Economic Empowerment. Such compliance says a lot to us about the commitment of the company in making sure that the pursuit of economic transformation unfolds as expected to the benefit of the broader society which, in this case, is estimated at no less than 1-million indirect beneficiaries."
POPCRU went on to say: "We are also aware that the visionary leadership of the company has made it possible for PHC to expand its business globally into Nigeria, Malawi and Russia, to name but a few, which will lead to further growth," Mnikelwa said. "These developments represent a symbol of growth that is greatly needed to create employment. As the group exports South African expertise outside our borders, more room is created for the young upcoming talent in the country to take positions, in this way addressing the skills development and equity issues at the same time. As an organisation, we commend the strong leadership of the company for striding forward in this growth path."
The introduction of NAWA as a shareholder of Protea, goes beyond the organizations' ownership percentage, addressing the equity from a woman's perspective. Being a catalyst for delivering on empowerment and advancement of women, this organization is 100% owned, controlled and managed by previously disadvantaged women. Liz Sangion from NAWA, has been appointed as a non-executive director of Protea Hospitality Corporation.
Liz Sangion, Group CEO of NAWA, added clarity to the rarity of this deal. "The primary landmark difference in this transaction is essentially that in other BEE transactions, men only brought women into the deal to take up a small stake once the deal had been concluded, allowing very little control over their investment or any intellectual contribution. Protea, however, has at the outset, recognised the value that women contribute to the national task of transformation, economic growth and the deepening of democracy in SA. This inclusive strategy will provide immediate and long term value in empowered operational innovations."
Protea Hotels' landmark hospitality industry BEE deal with NAWA will effectively empower in excess of 6 000 previously disadvantaged women throughout South Africa, with the group further benefiting their BEE scorecard with NAWA women being operationally involved in managing their investment.
The transaction is being funded by the Industrial Development Corporation (IDC), established in 1940 with a developmental mandate to contribute to the sustainable economic growth of South Africa and Africa as a whole. The IDC's core business is to provide finance to entrepreneurs for the development of competitive industries.
Katinka Schumann-Bester, Head of Tourism SBU said: "The announcement of the Protea Hotel BEE transaction comes at the most opportune time for the tourism sector. Traditionally, tourism has been a sector that has had a very slow rate of transformation. It is in the spirit of the tourism sector charter and scorecard that this transaction is being concluded. We at the IDC are very pleased to see the level of commitment that has been displayed by the Protea Hotel group to transforming the sector and hope that this will pave the way for other significant role players in the sector to follow where Protea has led."
Actis and Comafin commitment to this deal has highlighted their joint dedication to the empowerment imperatives in South Africa. Actis and Comafin were advised by Chartwell Capital Group, aiding to bring about this BEE deal. Peter Schmid, a managing partner of Actis, said: "We are delighted to have been able to increase Protea's BEE shareholding to this point. Protea has been a rewarding investment in that, together with Comafin, we have been able to add huge value to the business by leveraging our on-the-ground network in Africa. The tourism and hospitality sector remains interesting and we will consider further investments in this industry." Actis partnered with Protea's management to lead the group's African expansion being of particular assistance in Nigeria.
Adding to this, Richard Robinson, chief executive officer of Comafin said "At current exchange rates, our investment has generated a 21.5% IRR and 2.6 times cash multiple in five years in US dollar terms. I am pleased that we have been able to assist Protea with its BEE requirements."
The Comafin private equity fund was launched in 1996 by then President Nelson Mandela and is managed by an Actis-owned management company. It has a diverse investment portfolio. Fund investors are predominantly international, from Brunei, Singapore, the United Kingdom, Malaysia, Mauritius, Zimbabwe and Botswana, as well as the Development Bank of South Africa.
Otto Stehlik has reiterated his viewpoint, as stated in 2001 when Protea announced their first empowerment deal. "We cannot expect government to prioritise an industry which is largely white owned and white managed. The biggest challenge of this industry today is to transform itself in line with the demographics of this country. If we don't do it, somebody is going to do it for us, and we won't like it!" he said. Stehlik concluded: "We would like to take continue to take the lead by encouraging empowerment, as we can't rely on government support when our industry if we don't embrace the transformation that our country requires."
Protea Hotels, with an annual turnover of more than R1 billion, is Africa's largest hotel group. From a portfolio of four hotels in 1984, Protea Hotels has expanded rapidly and is today the largest hotel group in terms of numbers of hotels on the continent, with an extensive network of over 100 hotels and a presence in over 10 African and Indian Ocean Island countries as well as the United Kingdom. Brands include Protea Hotels, Premier Protea Hotels, Protea Hotels Landmark Lodges and African Pride Hotels and Lodges.