Naïve or devious?
Is Koppel guilty of blocking Investec/JCI merger?
THE TUSSLE over the controversial Investec/JCI loan agreement increasingly looks like a one-man vendetta from which third parties are unlikely to benefit and could end up big losers. While it’s tempting to blame South African expatriate lawyer and investor Monty Koppel as the stumbling block, there have been faults on both sides.
If you’ve been paying attention you’ll recall that last month’s AGM to vote on JCI’s proposed merger with Randgold & Exploration (RGE) was postponed for a fortnight to allow dissidents to negotiate a compromise with Investec over its claim of R575m – and rising. When the meeting resumed, surprise, surprise: no settlement proposal from the dissidents but one from JCI’s management that Investec would peg its claim at R275m – roughly R100m less than JCI itself put it at.
Koppel asked for another one-week postponement to consider that and, when meeting chairman Isaac Maleka, declined and voted to block the merger. That scuppered the proposed settlement, reactivating Investec’s full claim – which, JCI CEO Peter Gray said after the meeting, could go well over R1bn in a few years, with accumulated interest. As JCI’s stated net assets at 31 October were around R1bn it’s thus no exaggeration to say the claim would wipe the company out, leaving minorities with nothing.
Koppel was quoted on miningmx. com after the meeting as saying he didn’t think Investec is entitled to anything at all, which raises the question of whether there was any point in the two-week adjournment he requested in the first place. But the fact is: a company that comes up with a proposal it knows a major shareholder can block – at huge potential cost to all concerned – is being either naïve or devious if it doesn’t ensure he’s brought on board timeously.
We must also wonder how, after the original meeting was told it would be impossible to arrive at a settlement in two weeks, one was suddenly devised. We have to assume the parties involved were galvanised into action by Koppel’s reaction. Had they shown similar urgency a year or more ago, a good deal of subsequent unpleasantness could have been avoided.
On the other hand, it seems Koppel’s intransigence has cost him much support. At the original meeting, dissidents claimed to speak for 30% plus of JCI’s equity. With 2,2bn shares in issue that equates to more than 650m shares. Though that claim was never tested, because the meeting was adjourned by the chairman’s ruling, it wasn’t denied either.
However, at the resumed meeting only 461m shares voted against the merger. Koppel claims to hold 20% of the equity, though his main holding company – Letseng – has a disclosed interest of only 177m shares, or 8%.
But taking him at his word, Koppel controls 440m shares – and this suggests he was backed by holders of only 20m other shares, which, it’s rumoured, may have included fugitive ex-director John Stratton. While, as I say, no vote was taken at the earlier meeting at least one holder of 100m shares then backed the call for an adjournment but now appears to have switched sides.
While JCI’s issued equity is 2,2bn shares, 266m are held by RGE and 202m by JCI itself and its share incentive trust. So only around 1,75bn are entitled to vote, giving Koppel a permanent veto power over any proposal requiring 75% approval.
As long as Koppel remains adamant there’s simply no way of negating his opposition. If he’s prepared to accept the risk that his actions will render his investment worthless he’s entitled to. Other shareholders may feel he’s irrational but there’s nothing they can do about it.