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Grindrod concludes a R274 million Broad Based Black Economic Empowerment transaction

23 February 2009

Grindrod Limited, the JSE listed shipping and logistics business, has pleasure in announcing a Broad Based Black Economic Empowerment (“BBBEE”) transaction resulting in the sale of 25% plus 1 share of its subsidiary, Grindrod (South Africa) (Pty) Ltd (“GSA”) to Calulo Petrochemicals (Pty) Ltd (“Calulo”) (15%) and Adopt-a-School Foundation (“AAS” or ”the Foundation”) (10%) by way of the issue of new equity for a total consideration of R274 million. The BBBEE partners’ shares in GSA will be subject to the normal restrictions on alienation and encumbrance for a period of ten years from the commencement date of 1 January 2009 (“lock-in period”). GSA includes the majority of Grindrod’s 100% owned South African based operations, and the following businesses in particular: - Grindrod Terminals, comprising the dry and liquid bulk product terminal operations located in or adjacent to the ports of Richards Bay, Durban and Cape Town; - Grindrod Intermodal, comprising container freight logistics operations which extend to container handling, storage, warehousing, transportation, sales and leasing; and - Grindrod Logistics, comprising automotive logistics and storage operations, dry and liquid bulk transportation, perishable cargo clearing and forwarding and the provision of complete supply chain solutions in the furniture and durable goods sector. In negotiations with possible partners, Grindrod balanced its need to incorporate strategic commercial partners into the business as well as supporting the sustainability of worthy broad based enterprises. Grindrod’s intention in implementing a transaction was not only to comply with the Codes of Good Practice on BBBEE, but to establish a sustainable social investment that will make a difference in the lives of disadvantaged South Africans. Said Alan Olivier, CEO of Grindrod Limited, “We have a successful business relationship with Calulo and have already partnered with them in our South African marine bunkering and coastal shipping operation. They know the industry and add significant commercial value to the deal. The third party in this transaction, Adopt-a-School Foundation, fits very well with Grindrod’s social responsibility focus which has always been to support education initiatives. This is the first such transaction to be concluded by the Adopt-a-School Foundation and will ultimately create sustainability for Adopt-a-School, who’s current model relies entirely on donations from third parties. This sustainability will be created through GSA directing its Corporate Social Investment expenditure to Adopt–a-School from the inception of the transaction. The transaction will ultimately result in a capital profit to the Foundation if it choses to dispose of its investment in GSA after the ten year lock-in period, which will create a sustainable platform from which it can further extend the reach of the work that it does. “ Calulo is a black owned and controlled company which has developed a focused investment and operational niche in the oil and chemicals sectors and in the related bulk logistics services arena. 2009 marks Calulo’s tenth year in business, having been incorporated in 1999. According to Calulo Chairman, Mkhuseli Faku, “This transaction brings Calulo closer to realising its goal of active investment in all key aspects of the bulk logistics value chain. Our relationship with Grindrod over the years has developed into one in which we became mutual partners of choice. We believe that pooling our resources will realise numerous commercial synergies over and above the achievement of an acceptable BBBEE status for GSA and we look forward to growing the GSA operations along with them. Furthermore, we are particularly pleased at the facilitation of the Adopt-a-School Foundation as a material party to the transaction.” Adopt-a-School Foundation is a section 21 company that was founded in 2002 by Cyril Ramaphosa and other concerned South Africans. The Foundations’s vision is to be instrumental in the improvement of education infrastructure, particularly in rural areas, in order to create equal access to learning opportunities for all South African children especially the disadvantaged. The Foundation enables companies and individuals to participate in and improve the conditions of schools in historically disadvantaged communities. The ingenuity of the adoption model is that it creates sustainable schools by cementing a long term partnership between adopters, donors and the school community. This partnership approach creates direct benefits for the local communities through the creation of employment, the involvement of parents, the transfer of skills and the development of the learners to become productive citizens. Since its inception the Foundation has assisted 60 schools in 7 provinces. Donné Nicol, Director of the Foundation said “we are excited that this deal will, in the future, help us reach many more of the schools that apply to us every year for assistance”. The transaction structure has largely been vendor financed by Grindrod, with the exception of an own equity contribution by Calulo. AAS’s investment in GSA has been 100% vendor financed by Grindrod, which in addition to the main vendor financed structure, includes an interest free loan of R10 million that will remain in place for the full lock-in period. The Grindrod vendor financing, facilitated by means of a preference share structure, has been provided at a market related facilitated rate appropriate for transactions of this nature. The transaction is subject to a ten year lock-in. The BBBEE partners will, however, be entitled to sell their shares to other BBBEE partners at any point in time between years seven and ten of the commencement of the lock-in period, subject to Grindrod’s approval. All disposals of shares in GSA by the BBBEE partners are subject to pre-emptive rights in favour of Grindrod. AAS will in future have a capital asset which will, beyond the lock-in period, allow the Foundation to either raise funding against its shares in GSA, realise a capital profit on the sale of its shares in GSA or maintain its investment in GSA and continue to extract dividends to fund its various initiatives. In the interim, GSA will contribute approximately R1 million a year to AAS by way of Corporate Social Investment (“CSI”) expenditure for the ten year period of the lock-in. The intention is that the vast majority of all GSA’s future CSI expenditure would be directed to AAS. The CSI expenditure directed towards the Foundation will provide an element of predictability to the funding of its initiatives during the initial period whilst the funding of the transaction is being repaid. As part of the transaction, GSA will welcome onto its board Mr Mkhuseli Faku (Calulo Chariman), Mr Mpho Diale (Calulo CEO) and Ms Yaganthrie Ramiah (Adopt-a-School Director).

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