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

READ MORE: PIC inquiry witness suspended by the board just before testimony

PIC controversially invested R4.3-billion in the company when it made its debut on the JSE in December 2017.

READ MORE: PIC going after R4.3-billion paid to Ayo

Ayo and Sagarmatha are in effect controlled by Independent Media owner Iqbal Survé and both fall under Sekunjalo Investment Holdings, which is ultimately controlled by Survé through a family trust.


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

Subscribe to the M&G for R2 a month

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

And for this weekend only, you can become a subscriber by paying just R2 a month for your first three months.

Tebogo Tshwane
Tebogo Tshwane

Tebogo Tshwane is an Adamela Trust financial journalism trainee at the Mail & Guardian. She was previously a general news intern at Eyewitness News and a current affairs show presenter at the Voice of Wits FM. Tshwane is passionate about socioeconomic issues and understanding how macroeconomic activities affect ordinary people. She holds a journalism honours degree from Wits University. 

Related stories

Covid-19 causes Acsa to dust off its begging bowl

The SOE has asked the government for R3.5-billion in extra support over the next three years to offset losses incurred because of the pandemic

More arrests expected in the R2.3bn VBS heist

Prosecutors tell the court that more people will be charged and additional charges will be added to the seven accused in a new charge sheet

Justice department hit by a costly cyberattack

The theft of R10-million from the Guardian’s Fund account prompts the justice department to freeze all accounts until an audit can determine the extent of the damage

Ace pulls diplomatic strings for Steinhoff-linked pal

If the ANC general secretary has his way, Ithala chair Roshan Morar could soon be an ambassador

All agree: Use pension funds

The state wants to increase spending on infrastructure to drive economic recovery, and South Africans’ savings could help foot the bill

ANC wants pension funds to finance infrastructure build

The party released its plan for the reconstruction of the country’s post-coronavirus economy on Friday. This would involve changes to Regulation 28 of the Pension Funds Act
Advertising

Subscribers only

ANC: ‘We’re operating under conditions of anarchy’

In its latest policy documents, the ANC is self-critical and wants ‘consequence management’, yet it’s letting its members off the hook again

Q&A Sessions: ‘I think I was born way before my...

The chief executive of the Estate Agency Affairs Board and the deputy chair of the SABC board, shares her take on retrenchments at the public broadcaster and reveals why she hates horror movies

More top stories

DRC: Tshisekedi and Kabila fall out

The country’s governing coalition is under strain, which could lead to even more acrimony ahead

Editorial: Crocodile tears from the coalface

Pumping limited resources into a project that is predominantly meant to extend dirty coal energy in South Africa is not what local communities and the climate needs.

Klipgat residents left high and dry

Flushing toilets were installed in backyards in the North West, but they can’t be used because the sewage has nowhere to go

Nehawu leaders are ‘betraying us’

The accusation by a branch of the union comes after it withdrew from a parliamentary process
Advertising

press releases

Loading latest Press Releases…