Help for Bunker Hills

2011-10-08 14:34

AfriSam major shareholder Bunker Hills has found a white knight to defend it against former MTN chief executive Phuthuma Nhleko, who is eyeing a controlling stake in the debt-ridden cement maker.

A Mauritius-based private ­equity fund, managed by Ross ­Asset Management, has proposed to invest R5.5 billion to keep Bunker Hills as a controlling shareholder in AfriSam. Between R3 billion and R4­­ billion of the money will reduce AfriSam’s R11 billion debt, to be repaid at the ­beginning of February next year.

But Ross CE Itu Moraba said this week his proposal could be derailed by influential shareholder, the Public Investment Corporation (PIC), which wants to convert its preference shares in AfriSam.

A conversion will result in controlling shareholder Bunker Hills’s ousting and the PIC increasing its stake to 95% from 20%.

Bunker Hills, with 37%, and shareholder Cemasco will be left with about 5% between them. Cemasco is a unit of Swiss group Holcim, which controlled AfriSam but sold down its holding to 15% to accommodate a Bunker Hills-led black consortium in 2006.

The PIC ­invested R6 billion so the consortium could buy about 60% of ­AfriSam from Holcim and local construction firm Aveng in a R16.4 billion empowerment deal.

About R4 billion of PIC funding backed Bunker Hills via a preference share deal. The rest it used to take a 20% stake in the company. Preference shares are stocks with dividends paid to shareholders before common stocks dividends are paid out.

In the event of bankruptcy, preferred stock shareholders should be paid company proceeds before anyone else.

This week, Moraba accused PIC CE Elias Masilela and Nhleko of using PIC muscle on AfriSam black investors. Nhleko is chairman of Worldwide Africa Investment Holdings (WAIH), owed R3.4 billion by AfriSam, but has proposed to convert it into a controlling stake in the cement maker.

“The PIC was brought in to support black economic empowerment and now it is trying to replace black investors with WAIH ­because they don’t have funds to restructure the company,” he said.

“On the other hand you have WAIH trying to ­cannibalise black shareholders in AfriSam. This is black-on-black ­violence in business.

Our offer will put R650 million in Bunker Hills’ hands to help it restructure AfriSam’s debt. We will pay R1.7 billion to the PIC to ­recover some of the R6 billion originally invested in AfriSam.”

Moraba advised the empowerment consortium when it bought AfriSam from Holcim and Aveng. The assertion that Nhleko was ­favoured by the PIC to take over AfriSam was also made by Bunker Hills two weeks ago.

Masilela said this week that PIC would go ahead with plans to convert its preference shares. “We believe the decision we have taken as the PIC in exercising our conversion right is a contractually guaranteed right ­under the terms of the preference share subscription agreement signed between the relevant parties to the Afrisam transaction, and is a commercial determination that has nothing to do with the political or nationalistic assertions made here,” he said.

“We’re disappointed that ­parties could raise unnecessary, unfounded and dangerous political emotions to deal with commercial matters in this manner.”

When the AfriSam board meets next week, it will likely discuss debt restructuring and conversion proposals by the PIC and WAIH, which was still keen this week on converting debt it holds in AfriSam into a controlling equity – but that the deal must be ­“consensual”.

Holcim head of corporate ­finance and treasury Christof Haessig said Ross’s offer was being looked at “seriously”. He said: “We are committed to finding a solution for AfriSam, but it must be fair for everybody concerned.”

Bunker Hills chief executive and AfriSam director John Ramatsui said: “We have always supported the proposal, but the PIC has been blocking it. We hope other shareholders support it.”

The PIC has not seen Ross’s proposal. Bunker Hills has distrusted Nhleko ever since WAIH ­secretly rounded up the PIC and Cemasco last year and proposed to buy a 35% shareholding in AfriSam for R780 million.

He asked the two shareholders to buy out Bunker Hills and other black investors before WAIH could come in as a ­controlling shareholder. Bunker Hills foiled the plan. The ­black-owned firm is opposed to WAIH’s offer to convert its debt ­into a stake in AfriSam.

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