BBS investors to get P75m shares windfall
Brian Benza | Friday August 11, 2017 18:00
Aside of the free shares, qualifying members will also convert their investments or deposits in the society into shares with each investor limited to a maximum 15% shareholding in BBS Limited.
According to a prospectus for the BBS demutualisation process released this week, close to 52,000 members have invested about P1.5 billion into the society through three different classes of membership namely, subscription shares, paid up shares and indefinite period shares.
But only members who have held investments with BBS from August 24, 2016 will qualify for the free shares, with their quantum of the windfall determined by the average length of time of membership and balances for the last 10-year period.
The 51,959 members will on August 24 vote on a resolution for the society to be converted into a public limited company so that it can transform into a commercial bank subject to granting of a licence by the Bank of Botswana (BoB).
Issuing of new shares will be on the basis of the members’ current shareholding with an option to either convert the entire investments or transfer a portion to shares and the balance to deposit products. Large investors that will breach the 15% shareholding ceiling when their investments are converted to shares will have their balance of shares invested as debentures and other deposit products with the new company.
“In order to recognise the loyalty of qualifying members whom have been members for a continuous period, P75 million of the reserves have been allocated using an average length of time of membership and balances for the 10-year period immediately to August 24, 2017 to issue a total of 75 million shares in BBS Limited, at a par value of P1 each. Length of membership was limited to a maximum of 10 years as this is the period during which meaningful growth was realised,” the prospectus shows.
There are currently about 45,024 members holding paid up shares in BBS worth P447 million and 5,786 members holding subscription shares worth P60.4 million. On the other hand there are only 149 members holding indefinite period shares, but their investments represent the lion’s share at P910 million. While other memberships have been given a pass to forgo taking up equity in the new company, BBS says that the indefinite period shareholders will be required to convert 24.6% of their P910 million deposit balance into BBS limited shares.
As a result five of the largest indefinite period shareholders, Motor Vehicle Accident Fund, Botswana Privatisation Asset Holdings, Derik Brink Group, Botswana Police Savings Loans Guarantee Scheme and Botlhale Investments, will be required to use a percentage of their deposits to acquire shares up to 15% total shareholding in the company, respectively. “The remainder will be retained as deposits and/or used to acquire a debenture instrument at the option of the member,” reads the prospectus.
If members approve the conversion on August 24, BBS will be expected to convert into a public limited company by December 15, 2017 with members having been allocated the number of shares they would have applied for.
BBS Limited will be expected to list on the Botswana Stock Exchange’s Serala OTC Board by December 22 before submitting a banking licence application on December 29, 2017.
Subject to approval by the BoB, the society has proposed a change of name to BBS Bank Limited, which will become the local bank that is owned and controlled by Batswana.
“As a locally majority owned, controlled and managed Botswana company, BBS Limited will be in a position to craft and create tailored products suitable to the unique needs and requirements of the demographic and economic realities of Botswana
“For banks to expand lending, which is where profits are mainly generated, it will be necessary to mobilise additional deposits and liquidity. BBS is well placed to do this, as it already has a very attractive range of savings and investment products and a large number of member-depositors, which provide a base that can be leveraged,” adds the conversion statement.
With the demutualisation, BBS hopes to trade more competitively in the banking industry, as they would be able to provide all other banking solutions they are currently prohibited to offer by the Building Societies Act. According to the prospectus, BBS profits are expected to reduce from P47 million in 2017 to P38 million next year before experiencing a further drastic drop to P5.6 million in 2019.
A recovery in profits is only expected in 2020 at P46 million before it is seen jumping again to P67 million in 2021.