Lebashe, Coral Lagoon made PIC R1.7bn profit
Windfall included shares from Capitec Bank, Mahloele testifies
THE PUBLIC Investment Corporation (PIC) made a profit of about R1.7 billion in transactions it entered into with investment companies Coral Lagoon and Lebashe Investment Group.
Lebashe director Tshepo Mahloele yesterday told the PIC Commission of Inquiry that the profit included shares from Capitec Bank.
Mahloele told the commission how Coral Lagoon, a company he had an interest in and was a director of, sold Capitec shares to the PIC only for them to be bought by Lebashe after they had appreciated in value.
“The PIC had purchased the shares from Coral Lagoon in February 2012 at R156 per share. The PIC sold the shares in May 2015 to Lebashe at R461 per share. The profit made by the PIC from this transaction was, therefore, R316 per share, which equated to a total profit of some R1.7bn,” said Mahloele.
By the close of business yesterday, Capitec shares on the JSE were valued at R1 387.83.
Mohloele said Coral Lagoon’s sole business was its investment in Capitec.
He said the company owned 10 million shares, adding that Coral Lagoon approached the PIC with an offer to buy some of the shares.
“In February 2012, the PIC purchased almost 5.3 million of the Capitec shares from Coral Lagoon with funding from Investec Bank. Three years later, in 2015, Lebashe was established, initially under the name of PetraTouch,” Mahloele said.
“Lebashe presented a fully funded proposal for Lebashe to purchase the 5.3 million Capitec shares. By that stage, the Capitec shares had risen in value to R325 per share. The PIC was prepared to accept Lebashe’s offer to purchase the 5.3 million shares… but the deal was subject to various conditions precedent.”
Mahloele said the Capitec share price had risen to R461 per share at the time of the sale.
“The PIC insisted that the consideration payable under the agreement should be increased to R461 per share. Lebashe was unhappy with the increased price because it had secured funding for the deal at R325 per share.”
Mahloele said the increased price was a consequence of the delay caused by the PIC in satisfying the conditions precedent. It was eventually agreed that the PIC would lend the difference in the purchase price to Lebashe to enable it to buy the shares.
The amount of the loan was R720 million.
About two years later, Lebashe became interested in purchasing the remaining 4.7 million Capitec shares held by Coral Lagoon out of the original 10 million, according to Mahloele’s submission.
The company approached the Government Employees Pension Fund (GEPF) through the PIC for funding, as well as Peregrine Securities and Sanlam.
“The funding was secured for an amount of R1.4bn, with the GEPF loaning Lebashe R1.2bn of this amount, the other two entities the balance of R200m. Lebashe’s repayments of the GEPF loan are fully up to date and the smaller loan has been repaid. It is estimated that the PIC will profit from this transaction in the sum of R700m,” said Mahloele.
He also said in the first quarter of 2018 Lebashe repaid in full the first loan that it received from the PIC of R720m in respect of the first tranche of Capitec shares. “Lebashe also paid the PIC all accrued interest.”
The PIC, therefore, earned interest on this loan in excess of R200m over two-and-a-half years, said Mahloele.