Sagarmatha offered PIC cut-price deal, inquiry hears
Sagarmatha was so desperate to secure a R3-billion investment from the Public Investment Corporation (PIC) that it was willing to sell its shares to the state asset manager in a side deal brokered with former chief executive Dan Matjila for nearly 80% less than what they would have cost other shareholders.
This is according to PIC listed equities general manager Lebogang Molebatsi’s testimony to the Mpati commission, which is investigating impropriety at the state asset manager.
Molebatsi was part of the team who worked on the Ayo Technology Solutions transaction, when the
Earlier testimony before the commission alluded to Matjila and Survé being good friends.
It appears from Molebatsi’s testimony that the ink had barely dried on the Ayo transaction before Sagarmatha approached the PIC for a R3-billion investment to list on the JSE.
Ayo listed on December 21 2017 after the final committee required for approval signed off on the deal a day before.
On the same day as Ayo’s listing, Molebatsi received an email from the executive of listed investments, Fidelis Madavo, who said he had spoken to Sagarmatha about an initial public offering (IPO) date for the last week of January or the first week of February.
“Ayo was already a difficult investment to make and so to then have a subsequent Sekunjalo-related company [with overlapping timelines] was very strange,” Molebatsi said.
He was also concerned that part of Sagarmatha’s business model included using the capital it would raise to purchase Independent Media, which has a loan of about R1-billion from the PIC. “This would in effect mean that the exit of the PIC would be funded by the PIC.”
Molebatsi said, had it been up to the team, Sagarmatha would not have been presented to the portfolio monitoring committee for investment approval but it was “obvious that the CEO [chief executive officer] wanted this transaction to be presented to the PMC”. The team had been given an “instruction”.
With this in mind and learning from the Ayo transaction, Molebatsi said the team ensured that its submission to PMC “strongly highlighted” the risks contained in the transaction and had determined that a fair value for the company would be R7.06 a share, lower than Sargarmatha’s asking price of R39.62.
“If you think about it logically, what that would have meant was that the company would not raise as much capital as they were asking for.
So, if they were asking for R4-billion, they would have maybe raised much less than that,” he said.
But, after the PMC had approved the deal at R7.06, Matjila had continued negotiations with Sekunjalo and sent an email to the team on April 12 last year, asking them to submit a new document to the portfolio monitoring committee, which stated that the PIC would be buying R3-billion worth of Sagarmatha shares for the original asking price of R39.90. In addition, the PIC would be given a call option of R1, so if it bought enough shares in Sagarmatha, the average price for each share would be lowered to just R8.50.
“In effect, the PIC will be receiving exposure to Sagarmatha at a lower price of R8.50 than the IPO price on the same day that the other subscribers will be paying the full price.”
Sagarmatha would still get the R3-billion, but the PIC would get nearly five times the number of shares for that amount.
Responding to the commission’s assistant, Gill Marcus, who asked whether this was ethical, Molebatsi said, unless the arrangement was disclosed to other shareholders, “it would not be correct”.
“It is obvious that Sagarmatha desperately wanted to get the R3-billion from the PIC. And therefore they were willing to structure a deal in such a way that they would get the nominal R3-billion,” Molebatsi said.
Sagarmatha came close to listing on the JSE, but was tripped up because of administrative technicalities.
Tebogo Tshwane is an Adamela Trust business journalist at the Mail & Guardian