Lawyers in the money

Finweek English Edition - - Companies & Markets - SIKONATHI MANTSHANTSHA

SOME DEALS IN THE SE­RIES of of­ten­con­tro­ver­sial trans­ac­tions that net­ted in­vest­ment and gam­ing com­pany Hosken Con­sol­i­dated In­vest­ments (HCI) an ef­fec­tive 74,7% in­ter­est in gam­ing and ho­tel com­pany Tsogo In­vest­ment Hold­ings (TIH) are still un­der threat of fall­ing through. HCI’s 2008 an­nual re­port re­veals a se­ries of pos­si­ble court cases in which it’s still locked in bat­tles for con­trol of the black em­pow­ered gam­ing com­pany with Naf­coc In­vest­ment Hold­ing Com­pany (Naf­coc).

The first case in­volves Naf­coc mak­ing an ap­pli­ca­tion to the High Court to re­verse a deal whereby HCI wholly owned sub­sidiary Tangney In­vest­ments ac­quired 4,4% of TIH from African Re­nais­sance Hold­ings. As far as Naf­coc is con­cerned the trans­ac­tion doesn’t com­ply with TIH’s ar­ti­cles of as­so­ci­a­tion and it wants the deal re­versed.

“HCI has op­posed the ap­pli­ca­tion and the ap­pli­ca­tion has been ar­gued,” reads part of Naf­coc’s lit­i­ga­tion state­ment. It also stated the High Court has re­ferred the mat­ter to oral ev­i­dence and that Naf­coc had filed pa­pers set­ting out its claim. “HCI in­tends fil­ing a plea to the claim in due course.”

In yet an­other mat­ter, Naf­coc sent let­ters to TIH de­mand­ing it in­formed HCI that its share­hold­ing in TIH is a breach of TIH’s share­hold­ers’ agree­ments. TIH sought “in­de­pen­dent” le­gal ad­vice, which stated Naf­coc’s claim was without sub­stance. “Should Naf­coc take the mat­ter fur­ther the mat­ter will be de­fended by the rel­e­vant HCI sub­sidiaries,” says HCI.

And then there’s that not so small a mat­ter with re­gard to HCI’s buy­ing 50% Fabcos In­vest­ment Hold­ing Com­pany (which held shares in Tsogo). Naf­coc also ob­jected to that trans­ac­tion. Ap­proval of that deal was nev­er­the­less re­ceived from the pro­vin­cial gam­bling boards of Gaut­eng, KwaZulu-Natal and the East­ern Cape where Tsogo has op­er­a­tions. The Mpumalanga Gam­bling Board agreed with Naf­coc and also ob­jected to the deal go­ing ahead.

HCI has asked the High Court to re­view that re­fusal. The case is sched­uled to be heard over three days in April 2009. “An ad­verse out­come (on th­ese cases) may af­fect the ful­fil­ment of the con­di­tions to the FIH ac­qui­si­tion and/or HCI’s in­ter­ests in the Tsogo Group,” says HCI. “The ex­tent of the im­pact which such mat­ters may have on the HCI Group can­not be de­ter­mined at this stage.”

What’s more wor­ry­ing about all this is most of the deals were con­cluded back in 2006. At year-end there was an ex­ist­ing R181m claim against FI Fund­ing and In­vest­ments Holdco (for­merly Met­tle), which were classified as held for sale. The com­pany was sub­se­quently sold to man­age­ment, which wouldn’t com­ment on how the li­a­bil­ity arose, ex­cept to state the com­pany had been sold and there­fore the li­a­bil­ity no longer ex­isted.

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