Ayo to repurchase R619m in shares from pension fund

Ayo Technology Solutions has confirmed some of the terms and conditions of its settlement deal with the Public Investment Corporation (PIC) in terms of which it will repurchase R619m in Government Employees Pension Fund (GEPF) shares.

The terms of the initially secretive deal were first reported on by Daily Maverick.

Ayo on Monday said in a statement it would repurchase 17,202,756 ordinary shares in issue from the GEPF for R619m. It said subsequent to the initial repurchase the GEPF would retain a minimum stake of 25.01% in the company.

“The GEPF has the option, after a period of three years from the date of the initial repurchase, to sell up to a further 5% of the Ayo shares that it holds at the higher of R20 per Ayo share and the prevailing 90-day volume weighted average price of Ayo shares traded on the JSE, subject to JSE regulatory approvals and the solvency and liquidity of the company,” Ayo said.

Another condition to the settlement is that the GEPF will, for every 10% of the shares it holds in Ayo, be entitled to nominate one director to the board and will have to approve of the appointment of the chair.

“The GEPF may not unreasonably withhold approval for a resolution by Ayo shareholders authorising Ayo to render financial assistance to the subsidiaries of Ayo, and subject to regulatory approvals.”

Business Day reported last week that a legal opinion sought by the PIC advised it to settle its long-standing dispute with Ayo, saying the prospects of recouping its R4.3bn investment in the company in 2017 were grim.

Attorneys told the PIC several obstacles hampered the chances of success in a lawsuit it brought against Ayo, which is indirectly controlled by Independent Media owner Iqbal Survé.

The PIC alleged that the funds in Ayo were used, at least in material part, to settle the outstanding liabilities of certain of Ayo’s related companies.

The legal opinion listed six vital considerations that the top management should consider before agreeing to a settlement while the civil lawsuit was already under way in the Western Cape High Court. They included:

● The prospects of success in the litigation, considering the complexity and novel nature of the claims of the PIC.

● The financial position of Ayo, including cash on hand as reflected in the latest management accounts in possession of the PIC, to satisfy the payment amounts proposed in the settlement agreement.

● The evidence that had been led to date and witnesses still to be led, including those who had been “reputationally impugned in other proceedings, and those witnesses who were reluctant or refused to give evidence”.

● Threats levelled against witnesses.

● The potential growth of Ayo under different management and board, and the prospects of greater financial returns for the clients.

● The costs of the litigation and uncertainty of recovery or enforcement of a judgment, if eventually obtained.

The PIC and Ayo surprised many observers two weeks ago in announcing they had abandoned litigation and reached an out-of-court settlement, the details of which they said would not be made public.

The settlement was made an order of court by the high court. The PIC had approached the Western Cape High Court in an attempt to set aside its investment in Ayo and to recover the R4.3bn it invested in the firm.

This investment was made via the PIC’s participation in Ayo’s initial public offering through a private placement in December 2017, which valued the company at R14.8bn.

Ayo is now valued at R1.5bn on the JSE.