Business

Tokyo Sexwale's Mvelaphanda empire dwindles

Lynley Donnelly

Tokyo Sexwale's Mvelaphanda empire has shrunk to a single investment, fuelling belief that his campaign to be president is about to begin in earnest.

Countdown: Tokyo Sexwale is reportedly preparing for the Battle of Mangaung. (Muntu Vilakazi, City Press)

Once an elephant in the empowerment game, Mvelaphanda has had a stake in everything from diamonds to healthcare, construction and business services.

Media reports this week that the Mvelaphanda Group and other shareholders in Absa's empowerment vehicle, Batho Bonke, want to cash in their stakes in the bank marks the final steps in the winding down of the group.

But despite the steady unbundling of the Mvela Group's assets and Sexwale's diminishing stake, speculation continues that he is supporting his alleged political ambitions to become president of South Africa through his business interests.

After he left the private sector to take up an active role in politics as human settlements minister in 2009, he resigned his directorships in the companies that he helped to found, notably in the listed Mvela Group and the privately held Mvelaphanda Holdings.

In 2009, the last time his wealth was assessed, Sexwale's holdings were estimated to be about R1.9-billion, according to Andrew McGregor of research organisation Who Owns Whom. It also calculated that his annual remuneration for that year was about R10.7-million.

Sexwale has made many statements about withdrawing from the running of these entities and he appears to retain an interest only in family trusts, which are shareholders in Mvela Holdings.

Recently, there has been much speculation about the Batho Bonke sale, although it has clouded a bid led by investment company Blackstar Group to see the Mvela Group acquire media house Avusa.

Mvela Holdings, a private company, has an 18% stake in the listed Mvela Group. Mvela Holdings is understood to comprise trusts held in the name of the Sexwale family and those of long-time business associates Mark Willcox and Mikki Xayiya.

Not much is known about Mvela Holdings, although it is understood to have vested interests in energy and minerals in Africa and elsewhere.

Willcox, the chief executive of Mvela Holdings, did not respond to requests for comment, but a prospectus document released when business services company Mvelaserve was unbundled from the Mvela Group and listed on the JSE in 2010, shines some light on the shareholders of Mvela Holdings.

According to the prospectus, Mvela Holdings' shareholders are the TJS Family Trust, the beneficiaries of which are the Sexwale family; the Matimba Trust, whose beneficiaries include Willcox; the Dikela Trust, whose beneficiaries appear to include Xayiya; the Mvelaphanda Empowerment Trust, whose beneficiaries appear to include Sexwale's children; and the Mvelaphanda Investment Trust, whose beneficiaries include Willcox.

The Mail & Guardian could not establish the nature of these structures, or the size of each stake.

But this link has heightened concern that Sexwale or his associates could wield undue influence over Avusa, the media house that owns influential publications such as the Sunday Times.  

Late last year, Blackstar tried to take over the Mvela Group, but the bid was blocked by Mvela Group shareholder Coronation and it failed. But in January Blackstar succeeded in buying out Coronation, securing a 28% share of the Mvela Group.

The battle for Avusa
Initially, Blackstar did not seek full ownership of the Mvela Group,  but this shareholding is sufficient for Blackstar to launch a takeover bid of Avusa through Mvela Group subsidiary Times Media Group.

But the Mvela Holdings' share in the Mvela Group appears to continue to haunt the deal, and the Public Investment Corpora­tion, a major shareholder in Avusa, is set to oppose the transaction.

The M&G understands that one of the PIC's reasons for its misgivings over the possible transaction is the political influence the Mvela Group and Blackstar could have over Avusa.

But PIC chief investment officer Dan Matjila denied this. "The PIC would like to point out that its investment decisions are guided by the mandated investment objective of matching our client's assets with their liabilities," he said. "This single objective guides the portfolio decisions at all value-adding levels."

He said it was not clear why the transaction was necessary, because a turnaround strategy was in place at Avusa that would substantially benefit the company.

The PIC also could not accept one of the reasons given for the transaction, namely appointing the current managing director of retail solutions at Avusa, Colin Carey, to head the company should the deal go through.

"We prefer companies built around sound strategies first, and then capable people identified to drive those strategies," Matjila said. "Here we are presented with a name and not criteria that will be used to select the qualifying candidate."

He said the PIC was urging "concerned investors in Avusa to seriously consider the merits of this restructuring" and vote against the scheme. "It is our opinion that they will come to the conclusion that the private equity players are exploiting the lack of constructive shareholder activism in this asset to their advantage."

But Blackstar chief executive Andrew Bonamour described the continued speculation about political influence over Avusa as a "storm in a tea cup".

"The Avusa transaction is part of the unbundling and value-realising of Mvela Group," he said.

"We wanted to restructure Avusa in order to put it on the right track with the right management team in place. Avusa needs a catalyst to restructure; it cannot be done in its current form. We believe Avusa is a turnaround and fundamentally a valuable business."

He said that, with the right management team, Avusa (Times Media Group) could be a completely different business.  

The Avusa transaction would also result in an unbundling of the Avusa  shares to Mvela Group's "4500-odd shareholders, widening the shareholder base".

The Mvela Group started to unbundle in 2009. After its early empowerment heyday, the diverse and complex company was viewed as not giving shareholders sufficient value for their investment.

Since Blackstar obtained the controlling stake, the Mvela Group has rapidly disposed of much of its remaining interests, including those in hospital group Life Healthcare and Mvelaserve. That has left the Mvela Group with little more than its stake in Avusa and Absa through Batho Bonke. Blackstar was aiming to sell the Absa stake last year, Moneyweb reported.

Batho Bonke
The proposed cashing in of Batho Bonke shares by the Mvela Group has contributed to the hype surrounding Sexwale's reported political hopes.

The City Press reported on Sunday that exercising the share options could put R2.2-billion in the hands of Mvela Group, which owns 47% of Batho Bonke, and provide a war chest for Sexwale before the ANC elective conference in Mangaung.

But the M&G calculated that the payout could be as much as R3.2-billion after capital gains tax, excluding any outstanding debt in the empowerment deal. This could bring the payout closer to the reported R2.2-billion figure.

But it is not clear what direct benefit Sexwale would accrue through Mvela Holdings. Assuming Sexwale's stake in the Mvela Holdings amounts to roughly a third, the associated trusts could receive anything between an estimated R132-million and R192-million.

Approached for comment, Sexwale's spokesperson, Xolani Xundu, said the minister did not comment on companies he no longer ran. He referred the M&G to the many statements issued by the ministry in recent months that distanced Sexwale from these businesses and denied claims that he was using his business interests to further his political ambitions.

Batho Bonke spokesperson Chris Vick said it was a "misnomer" that a decision had been taken to sell out of Absa.

The national board of Batho Bonke - made up of its national co-ordinator and nine provincial co-ordinators - met on August 2 at its  annual general meeting and "took a resolution that a decision needs to be taken, in consultation with other shareholders, on whether or not to exercise the option that now exists to sell the shares", Vick said.

"This option was included in the terms of how the deal was initially structured more than six years ago, and is not something that was suddenly pulled out of the hat, as some media reports have suggested.

"Given that there is still no timeline for this process, the fact that the value of Mvela/Batho Bonke's share in Absa is subject to market fluctuation and other variables, and no final decision has been taken on how to proceed, it would be premature to count any financial or investment chickens before they're hatched," he said.

There has also been speculation that proceeds from the proposed Absa transaction would go towards smoothing the Mvela Group's buyout of Avusa. But Bonamour said that the Avusa transaction was already funded.  

"Mvela Group is in wind-down mode and the cash will be realised and returned to shareholders from the Absa sale. Following this, Mvela Group will become a shell," he said.

 


 

 

 

 

    Blackstar's Avusa interest 'commercially driven'

 

The Blackstar Group is the investment company at the centre of Mvelaphanda's bid to ­take over and restructure media house Avusa.

Registered in Malta, the company is listed on the Alternative Investment Market on the London Stock Exchange and has a secondary listing on the JSE's AltX.

In January it successfully clinched a 28% shareholding in Mvela Group by buying out Coronation Fund Managers for R470-million.

Coronation fund manager Dirk Kotze said the rationale for its investment in Mvela Group has changed substantially in recent years as the Mvela Group has been on a steady unbundling drive.

Coronation blocked Blackstar's original bid in late 2011 to buy out the Mvela Group because it had sought a cash-only buy-out, according to Kotze. In January this year, however, Blackstar was able to buy out Coronation's 28% stake in the Mvela Group with its cash reserves.

According to Kotze, Coronation sees the remaining upside in Mvela Group "largely as time value of money until its final break-up".  

When approached with an offer approximating this value, it opted to take the cash and use it to invest in a range of other companies.

Mvela Group and its board have previously committed to breaking up the group and realising the assets. The appetite to become more active in the running of Avusa is new and seems to have appeared after Coronation's exit, Kotze said.

Blackstar chief executive Andrew Bonamour said the company's interest in Avusa is driven by commercial imperatives and the belief that Avusa is "more than a newspaper group".

"We try and see what a company could become, not what it is currently," he said.

A 28.5% portion of the Blackstar Group is not held in public hands. But Bonamour said that Blackstar has no links with Mvela Holdings, Tokyo Sexwale or any associates.

The share is held by Blackstar's management with other shareholders that include asset management company Schroders, investment firm Henderson Global Investors and local hedge fund Visio Capital.

The company has interests in steel through pipe- and tube-maker Robor and stainless steel and ­aluminium distributor Stalcor; property through Blackstar Real Estate; and healthcare through the Litha Healthcare Group, according to its 2011 annual report. – Lynley Donnelly

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