The Public Investment Commissioners (PIC) have acquired a 15,1% stake in Telkom, which it is to warehouse for the Elephant Consortium, a black economic empowerment firm, for up to six months.
The stake was acquired from Malaysian-American company Thintana Communications at a discounted price of R6,6-billion, PIC CEO Brian Molefe told reporters in Pretoria on Tuesday.
”The PIC yesterday [Monday] agreed to purchase the stake. Both parties will enter into negotiations to determine how the consortium will acquire the stake from the PIC,” he said.
The Elephant Consortium is led by businessman and former director general of communications Andile Ngcaba and Women’s Investment Portfolio Holdings.
Its successful bid for Telkom shares has been criticised by opposition parties, the media and trade unions as not being true black economic empowerment, but only benefiting politically well-connected individuals.
Ngcaba has been accused of laying the groundwork for the deal while in the government. His current position as chairperson of Didata — a potential Telkom rival — has also raised questions about conflicts of interest.
African National Congress spokesperson Smuts Ngonyama apparently helped broker the deal.
Molefe said the Elephant Consortium approached the PIC and other funders for finance after being chosen the successful bidder subject to raising the required funds.
The PIC was not prepared to finance the deal in the manner proposed by the consortium, and so decided to devise a formula whereby it will have ample time to negotiate an appropriate financial structure for the deal — hence the warehousing option.
”The negotiations will be premised on the fact that the consortium won the right to purchase the stake from Thintana,” Molefe said.
The PIC’s decision to purchase and warehouse the stake was informed by three main considerations, he said. These were Telkom’s prospects of continuing to deliver value to its shareholders, a 15% discount on market value offered to the consortium by Thintana, and the ”tight” deadline of November 15 given by Thintana to conclude the deal.
Thintana first acquired a 30% stake in Telkom in 1997. In June, it sold 14,9% of that on the open market and then engaged in a bidding process to dispose of the remainder.
The PIC invests funds on behalf of public-sector entities, including the Government Employees Pension Fund. As one of the largest investment managers in the country, it manages assets worth almost R400-billion.
Asked about the public outcry over the Thintana deal, Molefe said politics were not involved in the PIC’s decision. He pointed out that ”quite a number” of consortia submitted bids, from which the Elephant Consortium was chosen by Thintana as the best candidate.
Negotiations with the consortium on a financing structure and a price will start shortly, he said. He was not prepared to divulge the options to be considered.
”Our commitment is to do an empowerment deal. I am confident we can negotiate an acceptable transaction in six months.”
In the meantime, voting control and any Telkom dividends will fall to the PIC.
Molefe said the PIC’s acquisition is a good investment, and expressed confidence about future prospects. — Sapa