ArcelorMittal South Africa Ltd (ACL.JO) Tuesday said it has entered into an agreement to sell a 26% stake in its operations valued at ZAR9 billion ($1.25 billion) to a consortium and employees in order to fulfill its black economic empowerment obligations.

South Africa's largest steel maker, majority owned by steel titan ArcelorMittal (MT), will sell a 21% stake to the Ayigobi consortium led by Sandile Zungu and a 5% stake to its employee share ownership program, in order to fulfill its obligations under South Africa's black economic empowerment, or BEE, legislation.

South Africa introduced black empowerment legislation after apartheid ended as a way to redistribute assets and wealth among the country's majority black population. Mining companies are required to sell a 26% equity stake in their assets to a partner with black empowerment credentials by 2014 in order to satisfy part of the government's BEE legislation.

The deal is subject to regulatory and shareholder approval. Shareholders will convene on September 28 to vote on the deal.

The deal will be fully funded by ArcelorMittal South Africa through a notional funding formula that includes an upfront loan. The loan has been structured so that BEE partners can monetize a portion of their gain early in the investment period.

The Ayigobi consortium will be locked into the deal for 14 years while employees would be locked into the deal for five years.

Separately, ArcelorMittal South Africa said Tuesday said it agreed to acquire Imperial Crown Trading, the company which holds the prospecting rights to a 21.4% share to Sishen iron ore mine, for ZAR800 million.

-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328; alex.macdonald@dowjones.com
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