Bitter war erupts for AfriSam

2011-09-24 13:59

A bitter war for the control of cement producer AfriSam has led to accusations that former MTN chief executive Phuthuma Nhleko is attempting to eliminate existing black investors in the debt-laden company, including an empowerment trust that seeks to uplift 300 rural women.

Bunker Hills, a black-owned company that owns 37% of the 60% held by black investors in AfriSam, told City Press that Nhleko secretly approached two key investors in AfriSam – the Public Investment Corporation (PIC) and Cemasco – in June last year to negotiate a deal for his company, Worldwide Africa Investment Holdings (WAIH), to acquire a 35% stake in AfriSam.

Motshwariseng Mobu, a director of Bunker Hills, said: “He (Nhleko) wants to sweep the current black shareholders aside. He went behind our backs and engaged with Cemasco and the PIC without our knowledge.

“For five years, we have been toiling for AfriSam and now he wants to offer us R150 million to walk away, which we think does not reflect the true value of the company.”

According to Bunker Hills sources, Nhleko is planning to seize control of AfriSam and then carve it up between WAIH, the PIC and Cemasco, a subsidiary of Swiss group Holcim, which originally owned 54% of AfriSam. Holcim sold down its stake to 15% in 2006 to a black consortium led by Bunker Hills in a R16.4 billion blockbuster black empowerment deal.

In the same transaction, local construction firm Aveng sold its 46% in AfriSam to the black consortium.

In December last year, Nhleko made a non-binding offer to the PIC and Cemasco to acquire a controlling stake in AfriSam.

However, he demanded that existing black shareholders be bought out and suggested that employees of AfriSam be given a 5% stake in the company.

“It is our preference that both Bunker Hills Investments Limited and the community grouping be given an opportunity to exit the structure on such basis as may be agreed between them, the PIC and Cemasco.

We believe that this is a necessary precondition to our entry into AfriSam,” reads a letter signed by Nhleko and dated December 9 2010.

Bunker Hills claims that when it got wind of WAIH’s plan, it protested and persuaded other shareholders to look for superior counteroffers.

But WAIH denied that it went behind the back of Bunker Hills in a bid to eliminate existing black investors.

“WAIH approached all three shareholders early in 2010, entered into long negotiations and walked away when the AfriSam shareholders decided to create a new bidding process on the verge of what WAIH thought was an in-principal agreement,” said a WAIH statement released through its public relations company.

“We have money to invest on a commercial basis in a strategic South African asset that is in need of investment. WAIH went out of its way to support the current BEE players by offering to provide R150 million in vendor finance for them to remain invested in the restructured AfriSam. That is the long and short of it.”

According to documents seen by City Press, Nhleko’s proposal has rival bids – one from a resources company and another from an investment firm that controls a $1 billion (R8.4 billion) private equity fund.

But Bunker Hills’ investors believe that the PIC is opposed to the two proposals and is in favour of WAIH becoming a new equity partner in AfriSam.

“We believe there has been unfair favouritism by the PIC towards Phuthuma. When you want to buy a company, you must be prepared to compete with other bidders in a fair and open bidding process.

Why should he be treated differently because we are looking for the highest bidder?” Mobu said.

The PIC has denied that it is favouring WAIH and says it has no choice but to deal with the company as it is now AfriSam’s major creditor.

Dr Daniel Matjila, the PIC’s acting chief executive, said: “As WAIH is now a major creditor, we will be engaging with them alongside other note holders as we attempt to find a mutually beneficial solution.”

AfriSam came on to Nhleko’s radar after the shareholders of AfriSam – Bunker Hills, the PIC and Cemasco – decided to sell a portion of the company to a new cash-flush investor as part of a strategy to restructure and reduce AfriSam’s R11 billion debt.

The debt is euro-denominated and the bulk of it is held by offshore creditors (debt note holders) and WAIH, which holds 37% of AfriSam debt.

As AfriSam shareholders bicker over who the new investor should be, the February deadline for settling the humongous debt is looming.

If AfriSam defaults, the creditors will have no choice but to take control of the company, a scenario that could see the PIC losing the R6 billion it invested in AfriSam.

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