Case Study
Reclamation Group of South Africa
A case study in leveraged finance

Prof. Ian Giddy, New York University

A Leveraged Ownership Restructuring
In October 2003, the existing shareholders in The Reclamation Group concluded a leveraged transfer of ownership designed to comply with South Africa's Black Economic Empowerment rules. They 25% + 1 share of the issued share capital of the company. The shares were sold to Phamangu Investment Holdings (Pty) Ltd and were registered in the name of Phamangu Investment Holdings (Pty) Ltd and the Industrial Development Corporation of South Africa on behalf of Phamangu. The other shareholders are, The Bidvest Group Ltd who hold in excess of 9.30% of the issued shares in the company and Brait South Africa Ltd controlling in excess of 21.70% through its management / control of South African Private Equity Trust III and Capital Africa Ltd. The senior management and certain employees of the company own slightly less than 44% being the balance of the issued shares in the company.

Phamangu Investment Holdings and the IDC now own 25% + 1 share of the issued shares in the company . The Bidvest Group Ltd and Brait South Africa Ltd are also structured in compliance with empowerment legislation / requirements. Together with the shareholding of Phamangu Investment Holdings (Pty) Ltd / the IDC this effectively broadens the empowerment base and ownership in The Reclamation Group to 32.5% of the issued shares of the company.

<>The Company
The Reclamation Group (Pty) Ltd (“Reclam”), was registered on 31 October 1998. At that time, the company purchased numerous companies involved in the purchase, processing and sale of secondary ferrous and non-ferrous metal. The group consolidated 14 different recycling businesses situated throughout Gauteng, the Free State, the Northwest Province, Western Cape and Mozambique, together with certain export sites in Richards Bay, Durban, East London and Maputo. <>In and during 2000, the company expanded its operations into other recyclable commodities which included paper, cardboard, plastic, glass, rubber and integrated waste management services. Reclam is the now largest processor of both ferrous and non-ferrous scrap metals and coupled with plastic, paper, cardboard, rubber, glass and non-toxic waste. Reclam is the leading supplier of secondary raw materials recovered from recycled scrap and waste for use by downstream industry in Africa. The company has branches in Swaziland, Mozambique, Malawi, Kenya, Zambia and Botswana.<> The work force exceeds of 2500 employees, and Reclam has a specialist fleet of over 600 purpose built vehicles and in excess of 4000 containers placed at customer locations for collection of recyclable materials. Reclam typically collects, processes and delivers well in excess of one and a half million tons of recyclables during each year, with a turnover in excess of 2 Billion Rand per annum.


Structuring the Deal


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