- Black-owned investment holding firm Lebashe entered into an empowerment transaction with technology group, EOH, in 2018.
- EOH's capital raise programme is set to amend the terms of Lebashe's A shares, giving it a better chance of turning them into ordinary ones.
- The technology firm is in the process of securing a R600 million capital raise to boost its balance sheet.
- For more stories, go to the News24 Business front page.
The R600 million capital raise planned by ICT firm EOH is set to ensure an extension of its relationship with empowerment partner Lebashe Investment Group by another five years, according to details released by the company on Friday.
In 2018, EOH entered into a R750 million empowerment transaction with Lebashe, which the technology company said was necessary to inject capital into the firm, and involved issuing 40 million voting-only A shares.
Class A shareholders have more voting rights than owners of other classes of stock and give them a greater voice in the affairs of a company, and each of the A shares issued to Lebashe entitled the entity to a certain number of EOH ordinary shares after a five-year period, subject to the EOH ordinary share price reaching a strike price of R90. However, as of Friday, the firm's shares were trading at only R3.80.
The earlier deal, subject to shareholder approval, will now be amended change the strike price to that of the closing price of EOH's ordinary share price after the publication of the results of the rights offer, increased by a 25% compound annual growth rate.
"The effect of the A share amendments would be to provide Lebashe with a reasonable prospect of it being issued with EOH ordinary shares upon maturity of the A shares whilst also extending the life of the company's empowerment transaction by a further five years," EOH said in a statement.
Lebashe's cash injection into EOH will increase its stake from around 14% to about 22%, depending on the rights offer price.
"Lebashe has stood by us in the difficult times and is now significantly increasing their stake in the company which demonstrates their confidence in the strategic future of EOH," said Fatima Newman, EOH Group Chief Risk Officer.
After going through a difficult financial position, EOH is on the road to recovery and its 2022 financial year saw its revenue stabilise at R6 billion and nearly doubling operating profit from R55 million to R100 million. Debt, which had been a significant negative factor for the company has reduced from 2 billion in January 2022 to R1.2 billion, thanks to a series of asset disposals it has concluded.
The company, which intends to use most of the proceeds of the rights issue to settle debt, expects to hold a general meeting of shareholders on 13 December.