Sagarmatha proposal raised red flags from the start, PIC inquiry hears

The Sagarmatha Technologies business case raised red flags when the company was making its funding proposal to the PIC, the inquiry into the state-owned asset manager has heard.

Sagarmatha – which had been intended to unite the various groups in businessman Iqbal Survé's media empire under one technology and media umbrella – had approached the PIC for funding, prior to its failed listing on the JSE in 2018.

Lebohang Molebatsi, General Manager for Listed Equities, said the first thing that struck him about the proposal was that another company linked to Sekunjalo Group was looking to list soon after AYO Technology Solutions, and that the capital raised was to facilitate the purchase of Independent Media.

"Although I was not aware of the details around the funding of Independent Media, I knew that the PIC had extended a loan to that company," said Molebatsi.

"The exposure to a print company that was loss-making made the Sagarmatha opportunity not attractive," Molebatsi said.

In April 2018, the JSE cancelled Sagarmatha’s listing, saying the company had not submitted its annual financial statements to the Companies and Intellectual Property Commission in time for the listing to go ahead.

Sagarmatha was hoping to raise up to R7.5bn in the placement of 189 million of its 1.2 billion shares.

Molebatsi said engagements with Sagarmatha revealed that its valuation was significantly lower than their initial public offering (IPO), but the company was not willing to lower their expectations.

Inflated share price

He told the commission that a fair value was R7.06, compared to the IPO asking price of R39.62 per share. The PIC deal team had submitted a request for the investment committee to approve the PIC participation in the Sagarmatha IPO at R7.06.

Sagarmatha was also aiming to buy all the shares in Sekunjalo Independent Media, the holding company that owns a 55% stake in newspaper publisher Independent Media, which in turn owns the Cape Times, the Star and other newspapers.

Molebatsi said the deal team was further concerned that cash raised from the IPO would be used to buy Independent Media shares from the PIC.

"This would effect mean that the exit of PIC would be funded by the PIC," he said.

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