The black economic empowerment (BEE) investors in African Bank Investments Limited (Abil) have taken the ailing entity to court‚ seeking an interdict to stop the sale of its insurance subsidiary Stangen to a yet-to-be created “good bank” from the demise of African Bank.
If the sale is thwarted‚ it will negatively affect the formation of the good bank.
Last year, African Bank‚ which was part of Abil‚ was put into curatorship. The rest of Abil‚ which included Stangen and furniture retailer Ellerines‚ have been in business rescue.
Partners Hlumisa Investments and Eyomhlaba Investments have asked the court to stop this week’s meeting of Abil’s creditors from approving the sale of Standard General Insurance Company (Stangen) as they believe the agreement prejudices Abil shareholders by selling “its major asset at a price that is substantially less than its true value”.
In an urgent application filed in the Pretoria High Court on Friday‚ the two BEE investors insisted the R1.3-billion sale of Stangen to the new bank disadvantaged them and other shareholders as Stangen was worth “about R8.5-billion‚ at a very conservative valuation‚” Hlumisa Investments chairman Desmond Lockey said.
“The approval‚ conclusion and implementation of the sale‚ in the absence of full disclosure‚ could result in irreparable harm to the company and its stakeholders‚ of which the applicants form part‚” Lockey said.
“The applicants‚ being minority shareholders‚ have no alternative manner in which to act in protection of the company and the other stakeholders to whom full disclosure is being withheld.”
Stangen made R786-million profit in the six months to March‚ according to Abil’s interim report.
“They’re buying it for a dividend yield of 51% and a price: earnings of two-times profit. Is that a fair and reasonable price? Without Stangen‚ the new bank is not viable‚” Lockey argued.
The unit offers credit life insurance to customers who obtain African Bank loans. Its sale to the “good bank” is part of a business rescue plan and is key to helping Abil meet the R966-million it owes to creditors‚ including South Africa’s major banks.
The sale and the business rescue proceedings are subject to approval by creditors‚ but the BEE shareholders believed the asset was being sold on the cheap to an entity in which they were excluded from participating.
“This is not a business rescue. It is a manipulated liquidation stealing Stangen from the Abil shareholders at a ridiculously low amount. If the transaction goes ahead, they will get Stangen for next to nothing while Abil’s shareholders had put in R8-billion capital in rights issues in the months leading to Abil being placed in a curatorship‚” Lockey said.
Abil’s business rescue practitioner Dawie van der Merwe said last week that KPMG had done a fair value assessment of the business.
“We believe we did a good deal. We had gone to obtain a totally independent fair value assessment. We have fought hard to get a deal which we believe is much better than when we started‚” Van der Merwe said.
Abil would realise way more than R1.3-billion from the sale of Stangen‚ he said. Abil’s business rescue plan shows that total realisations by the company from Stangen are estimated to be between R2.4-billion and R2.5-billion.
This is because the insurer also had some cash. The primary proposal of the rescue plan was to sell Stangen to the new bank‚ and if the deal could not go through‚ Abil would sell Stangen to another buyer‚ the investors said.
The South African Reserve Bank last August put African Bank into curatorship and appointed Tom Winterboer as curator after the company suspended its shares from trading on the JSE under the weight of financial losses.
Winterboer is splitting the group into two companies: a “good bank” that will be listed on the JSE and another that may be liquidated. The Reserve Bank would own half of the new company‚ while the Public Investment Corporation would hold a quarter and major South African banks‚ who helped underwrite the curatorship of African Bank‚ would hold the balance.
Winterboer’s dual role as the “buyer” of Stangen on behalf of the new bank‚ and as “seller” on behalf of the curatorship‚ had seemingly raised a possible conflict of interest.
“How can you rely on the person buying the business to give you its valuation?” Lockey asked. There was a conflict in the valuation reports produced by KPMG‚ which valued Stangen as a business that had to be wound down‚ and the “good bank” buying it as a going concern.
The respondents are Abil’s business rescue practitioners and eight other companies and banks who are Abil’s creditors.
Hlumisa and Eyomhlaba want parties to the transaction to first provide all documents and the valuation reports conducted by KPMG made public before the transaction can be approved.
The BEE investors also believed this was not a business rescue but a winding down of assets. —
Stangen sold ‘on the cheap’
If the sale is thwarted‚ it will negatively affect the formation of the good bank.
Last year, African Bank‚ which was part of Abil‚ was put into curatorship. The rest of Abil‚ which included Stangen and furniture retailer Ellerines‚ have been in business rescue.
Partners Hlumisa Investments and Eyomhlaba Investments have asked the court to stop this week’s meeting of Abil’s creditors from approving the sale of Standard General Insurance Company (Stangen) as they believe the agreement prejudices Abil shareholders by selling “its major asset at a price that is substantially less than its true value”.
In an urgent application filed in the Pretoria High Court on Friday‚ the two BEE investors insisted the R1.3-billion sale of Stangen to the new bank disadvantaged them and other shareholders as Stangen was worth “about R8.5-billion‚ at a very conservative valuation‚” Hlumisa Investments chairman Desmond Lockey said.
“The approval‚ conclusion and implementation of the sale‚ in the absence of full disclosure‚ could result in irreparable harm to the company and its stakeholders‚ of which the applicants form part‚” Lockey said.
“The applicants‚ being minority shareholders‚ have no alternative manner in which to act in protection of the company and the other stakeholders to whom full disclosure is being withheld.”
Stangen made R786-million profit in the six months to March‚ according to Abil’s interim report.
“They’re buying it for a dividend yield of 51% and a price: earnings of two-times profit. Is that a fair and reasonable price? Without Stangen‚ the new bank is not viable‚” Lockey argued.
The unit offers credit life insurance to customers who obtain African Bank loans. Its sale to the “good bank” is part of a business rescue plan and is key to helping Abil meet the R966-million it owes to creditors‚ including South Africa’s major banks.
The sale and the business rescue proceedings are subject to approval by creditors‚ but the BEE shareholders believed the asset was being sold on the cheap to an entity in which they were excluded from participating.
“This is not a business rescue. It is a manipulated liquidation stealing Stangen from the Abil shareholders at a ridiculously low amount. If the transaction goes ahead, they will get Stangen for next to nothing while Abil’s shareholders had put in R8-billion capital in rights issues in the months leading to Abil being placed in a curatorship‚” Lockey said.
Abil’s business rescue practitioner Dawie van der Merwe said last week that KPMG had done a fair value assessment of the business.
“We believe we did a good deal. We had gone to obtain a totally independent fair value assessment. We have fought hard to get a deal which we believe is much better than when we started‚” Van der Merwe said.
Abil would realise way more than R1.3-billion from the sale of Stangen‚ he said. Abil’s business rescue plan shows that total realisations by the company from Stangen are estimated to be between R2.4-billion and R2.5-billion.
This is because the insurer also had some cash. The primary proposal of the rescue plan was to sell Stangen to the new bank‚ and if the deal could not go through‚ Abil would sell Stangen to another buyer‚ the investors said.
The South African Reserve Bank last August put African Bank into curatorship and appointed Tom Winterboer as curator after the company suspended its shares from trading on the JSE under the weight of financial losses.
Winterboer is splitting the group into two companies: a “good bank” that will be listed on the JSE and another that may be liquidated. The Reserve Bank would own half of the new company‚ while the Public Investment Corporation would hold a quarter and major South African banks‚ who helped underwrite the curatorship of African Bank‚ would hold the balance.
Winterboer’s dual role as the “buyer” of Stangen on behalf of the new bank‚ and as “seller” on behalf of the curatorship‚ had seemingly raised a possible conflict of interest.
“How can you rely on the person buying the business to give you its valuation?” Lockey asked. There was a conflict in the valuation reports produced by KPMG‚ which valued Stangen as a business that had to be wound down‚ and the “good bank” buying it as a going concern.
The respondents are Abil’s business rescue practitioners and eight other companies and banks who are Abil’s creditors.
Hlumisa and Eyomhlaba want parties to the transaction to first provide all documents and the valuation reports conducted by KPMG made public before the transaction can be approved.
The BEE investors also believed this was not a business rescue but a winding down of assets. —
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