Julian Treger, the investor best known as an activist shareholder, is to turn a listed cash shell into a vehicle for financing projects in his native South Africa that transfer ownership of businesses to the country's majority black population.
Illuminator, quoted on AIM, plans to issue shares to raise money for its new Black Economic Empowerment (BEE) mission. It will be renamed Blackstar Investors. The move follows government policy in South Africa, institutionalised under the BEE Act which came into force in 2004, that requires businesses to sell more than 25 per cent of equity to black workers.
Although companies do not need to transfer ownership for some years, many are complying with the rules early. The goal is to follow the black political empowerment that resulted from the end of apartheid with economic empowerment for the black population. However, the policy has been criticised for transferring wealth from whites to a new, politically well-connected, black elite.
Illuminator will seek to finance the special purpose vehicles typically set up for BEE deals. The company said: "BEE transactions are often characterised by a prescribed selling process within a defined time period, resulting in a large number of investment opportunities becoming available to only a limited number of largely under-funded investors. This imbalance has provided a opportunity for the providers of capital to obtain attractive investment terms."
Illuminator said it would seek to raise up to £50m, though Mr Treger said the initial fund-raising would be "much less". The company, which has not been active for some time and has a stock market value of just £678,000, had its shares suspended yesterday, pending shareholder approval of its change in strategy. Existing shareholders could be left with less than 1 per cent of the group after the new equity is issued.
Mr Treger said: "The [BEE] process is gaining momentum .... Historically, investors have been nervous about exposure to the South Africa currency, violence in the country, Aids and so on. People needed a period of time when things have been stable."
Illuminator's advisers for BEE deals, Blackstar Managers, a firm in which Mr Treger has a 23.5 per cent stake, will take a fee of 2 per cent of the funds available, plus a fee of 20 per cent of the gains realised.Reuse content