SABMiller will offer 10% of shares in its South African Breweries subsidiary to black investors, at an estimated cost of US$220m, to improve compliance with the Government's Black Economic Empowerment initiative.

SABMiller said today (01 July) that it will offer an estimated US$750m-worth of shares in South African Breweries to black-owned licensed liquor retailers, black-owned customers of SAB's soft drinks division, ABI, and also to the wider black community.

No external bank funding will be required to fund the share issue, SAB said.

Participants will have to make "a small cash investment" to cover administration costs, although the brewer added that "meaningful cash dividends" are expected to be paid out from the first year of the scheme, which will begin on  1 April 2010.

For SAB, the move enhances its compliance with the Government's Code of Good Practice on Black Economic Empowerment.

A spokesperson for the brewer told just-drinks that this would not mean direct financial gain for SAB. Companies with low compliance cannot do business with Government-owned entities.

The move has also been devised to "normalise South Africa's liquor industry". A spokesperson said that, by offering shares only to licensed retailers, it is hoped that more black market operators will be encouraged to apply for a licence.

Graham Mackay, SABMiller CEO, said: "We have structured this transaction to maximise benefits for all our stakeholders and to deliver genuine broad-based black economic empowerment."

Those who buy SAB shares as part of the offer will hold them for ten years. After this, SABMiller will buy back the stake and issue new shares in SABMiller for an equivalent value, the brewer said.   

The initial share offer will be made via three investment entities. Employees and retailers will be offered 40% each of the shares. The remaining 20% will be sold to the wider community via the SAB Foundation.

Several Analysts reacted positively to SABMiller's proposal.

"Net-net, this appears to us to tick a great deal of politically important boxes," said Trevor Stirling, analyst with Sanford C Bernstein. "To achieve all this at a cost of less than 0.7% of Market Cap appears to us to be a good deal for shareholders."