The Minister of Public Enterprise, Mr. Jeff Radebe is pleased to announce that the Cabinet has approved the repurchase of the 20% stake in South African Airways (SAA) held by Swissair.
In June 1999, Transnet entered into an agreement with Swissair in terms of which Transnet sold 20% of its shareholding in South African Airways (SAA) to Swissair for a price of R1, 4 billion and, in addition, granted to Swissair, an option to sell and transfer a further 10% to Swissair thereby increasing its stake to 30% above the threshold of 25,1% which provides certain minority protections under the South African company law.
During the latter part of 2001, it became apparent Swissair was experiencing financial difficulties. Equity markets in general and airline stocks in particular exacerbated this scenario by becoming highly unsettled following 11 September 2001. On the 4 October 2001, as a consequence of this turbulence, Swissair filed for a moratorium of debt enforcement, with the competent courts in Zurich and a provisional Administrator over the SairGroup was appointed by the Swiss courts. In terms of the Shareholders Agreement between Swissair, Transnet and SAA, Swissair's financial difficulties and the appointment by the Swiss Courts of provisional Administrator constituted an "Event of Default". The Event of Default (if either not remedied or not capable of remedy), entitled Transnet to various contractual remedies under the Shareholders Agreement including Transnet's right to terminate the Shareholders Agreement and reacquire Swissair's 20% shareholding in SAA at a price of 85% of the current value of such shares.
After considering various contractual and commercial alternatives available to Transnet that included third party acquisition of shares and an equity markets public offering, a special board meeting of Transnet held on Thursday, 18th October 2001 resolved that Transnet should exercise its right to terminate the Shareholders Agreement and reacquire Swissair's 20% shareholding in SAA. This strategy was endorsed by Cabinet today.
Following certain correspondence with Swissair, Swissair acknowledged the Event Default and informed Transnet that it was not in a position to remedy the Event Default and that in these circumstances waived any rights to be afforded a 30 day period provided for in the Shareholders Agreement which to remedy the Event Default. In consequence, Transnet became entitled to terminate the Shareholders Agreement and to reacquire the 20% in SAA at 85% of the Fair Value of such shares. On the 2nd November 2001, Transnet issued a Termination Notice in terms of the Shareholders Agreement, the effect of which was to implement the procedure for:
The process for the determination of the Fair Value of the shares to be acquired from Swissair has begun, as Government seeks to consolidate its shareholding in SAA. Government will further review its restructuring options on SAA going forward, after the reacquisition of SAA shares is finalised.
Issued by:Dep. of Public Enterprises Contact person: Pumla Mtyeku 082 586 1957Date: 2001-11-21