The tussle for the lucrative Tsogo Sun gaming empire took an unexpected twist on Tuesday when Hosken Consolidated Investments (HCI) flexed its muscles at Johnnic's annual meeting on Tuesday by thwarting a key share buy-back scheme.
However, HCI stopped short of delivering the knockout blow for which Johnnic was bracing itself.
The two companies are mired in a rivalry over the lucrative Tsogo Sun gaming empire, but to complicate matters, HCI recently bought 40% of Johnnic and is trying to wrest control in the face of opposition from its board.
At a Competition Tribunal hearing last week, Johnnic played up its fear that HCI would try to hijack on Tuesday's meeting to have its own directors appointed to Johnnic's board - a strategy that HCI CEO Johnny Copelyn tried unsuccessfully in June.
Although HCI voted its 40% in Johnnic on Tuesday, it was a more muted show of muscle than the dramatic meeting in June.
Notably, HCI abstained when it came to the re-election of the existing Johnnic directors, allowing Connie Molusi and Patrick Burton to be voted on to the board again.
But HCI defeated Johnnic's proposal to buy back up to 20% of its own shares in the market, a notable show of force ahead of looming legal disputes between the two companies. The two companies will clash at the Eastern Cape gaming board tomorrow, and again in various different tribunals over the next few weeks.
If Johnnic succeeds in each of its legal challenges, it will control more than 60% of Tsogo Sun's controlling shareholder, Tsogo Investment Holdings. If not, HCI is likely to emerge as the victor.
Speaking afterwards, Copelyn said HCI was focused on the bigger picture, and "squabbling over the appointment of nonexecutive directors is a complete waste of time".
HCI squashed the share buy-back because, "given the generally hostile view (of Johnnic to HCI), they would pay any price to buy their shares back - (which) would have artificially propped up the share price in the short term", said Copelyn.
Through an offer which has been rejected by Johnnic's board as too low, HCI is also offering to buy out Johnnic shareholders for R10,70 a share plus a share alternative.
But at the meeting, Johnnic chairman Cyril Ramaphosa said he "lives in hope that we will find a way to resolve this dispute. Many attempts have been made to reach agreement with (HCI) and a number of related parties," he said.
But Copelyn said that as far as he was aware, Johnnic had not contacted HCI "for months".
"There are no negotiations and no proposals - (but if there were), we would consider the merits of any offer," he said.
Despite talk of a truce, Johnnic has launched various legal actions to block HCI. On Tuesday, Johnnic launched a court bid to prevent HCI going ahead with a deal with Fabvest - a company which indirectly controls part of Tsogo - claiming that HCI's deal was unlawful.
Copelyn said Johnnic's legal actions exposed its "lack of a viable vision" for its future. "Johnnic has said its vision is to take control of Tsogo Sun and their method of doing so is to undo deals which HCI has already done. Basically, they are saying, invest in Johnnic and we will sue HCI," he said.
Johnnic CE Christine Ramon said that "until we reach an agreement, we have to take actions to protect our shareholders". HCI had demonstrated "it is not acting in the interests of Johnnic shareholders".
Johnnic shareholders yesterday warned that in a "clash of two bulls", shareholders would get trampled, while both firms leaked value.
Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge
