By Stephen Gunnion

Hosken Consolidated Investments (HCI) yesterday flexed its muscle as Johnnic's new controlling shareholder, scuppering the group's R675 million cash and share bid to buy Nafhold, despite a number of last-minute attempts to save the transaction.

Following intense negotiations ahead of yesterday's key shareholder meeting to vote on the Nafhold deal, HCI and Johnnic could still not reach a compromise deal to save it, without reducing HCI's stake in Johnnic, which had reached 49% by Friday.

Developments at Johnnic over the past week leave HCI as its effective controlling shareholder.

Following the failed Nafhold deal, CEO Christine Ramon said the future of Johnnic, one of SA's oldest empowerment companies, now lay in HCI's hands.

"I am very disappointed. It made business and commercial sense," Ramon said after yesterday's shareholders' meeting.

"Clearly HCI will determine the future of Johnnic."

Shareholders, believed to be HCI and another large investor, voted 54,22% against the deal. They also voted 53,9% in favour of electing HCI directors Marcel Golding, Velaphi Mphande and John Copelyn, as well as Michael Jacobson, who is a director on various HCI subsidiary companies, to Johnnic's board.

This had earlier been turned down by shareholders due to a perceived conflict of interest because of both companies' interests in Tsogo Investment Holdings (TIH), which controls gaming group Tsogo Sun.

Buying Nafhold would have bolstered Johnnic's stake in TIH to 34,5%. HCI owns about 44% of TIH. Tsogo Sun is southern Africa's largest hotel and entertainment group, with interests in Gauteng's Montecasino, KwaZulu-Natal's Suncoast Casino, Hemingway's Casino in Eastern Cape and about 82 hotels in the Southern Sun Hotels Group.

Although Copelyn said buying Nafhold would have been a good deal for all Johnnic shareholders, HCI was not prepared to dilute its stake in Johnnic by allowing 33-million new shares to be issued to help finance the deal.

Copelyn said the group would have preferred to buy back the 33-million shares needed to fund the deal from institutional shareholders at R12,50.

The R12,50 is significantly higher than the R10,70 HCI offered Johnnic shareholders for their shares in an offer that closed earlier this month.

However, institutions canvassed at yesterday's meeting said the R12,50 was too low for Johnnic.

Last month, Coronation Fund Managers, which owns 10,8% of Johnnic, valued the group at R15 a share if the Nafhold deal was successful.

David Fraser, MD of Peregrine Capital, owner of about 3,5% of Johnnic, said it was not up to institutions to facilitate the deal so that HCI could benefit at the expense of its own clients.

"Everyone has lost value," Fraser said. "It was a once in a lifetime deal and it's gone. I feel the wrong decision was taken today."

Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge