Cisco surprises with all-share equity deal in South Africa

Mergers, Acquisitions and Financial Results

Nasdaq-listed networking giant Cisco Systems has become the first US hi-tech company to sell shares in its business to local black investors. Cisco has shunned the route of equity equivalents, which lets multinationals avoid selling any shares by pumping cash into social development schemes. Instead, Cisco is selling shares in its parent company to the local Lereko consortium, led by Valli Moosa and Popo Molefe.

The price Lereko will pay for its shares has already been fixed, but will be whittled down if the political and business clout of its members opens doors and grows the local subsidiaries above some preset targets. Moosa is a former environmental affairs and tourism minister, while Molefe is a former premier of the North West province and provincial chairman of the African National Congress.

A second portion of the deal has a broad-based component, as free shares will be given to Cisco SA’s previously disadvantaged staff. A third tranche will go to a new education trust, where the beneficiaries include students granted scholarships to attend the African Leadership Academy.

The value of the deal was not disclosed, but must run into more than R100m. Last month the US computer company HP announced an equity equivalent deal that pushed its total investments in empowerment compliance to R150m.