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- Details of the deal between the Public Investment Corp. and the IT group AYO have still not been made public.
- Economist Iraj Abedian says public-sector employees deserve to know why the reported settlement amount is so low.
- Leaks suggest the PIC settled its R4.3-billion claim for an initial payment of R600 million.
- For more financial news, go to the News24 Business front page.
South Africans urgently need answers on why the Public Investment Corporation's (PIC) R4.3-billion court case against AYO was allegedly settled for just R600 million, says Iraj Abedian, chief economist of Pan-African Investment and Research Services.
On 24 March, the PIC - which manages the pension investments of SA's civil servants - settled its long-running legal claim against IT group AYO behind closed doors. Neither AYO nor the PIC has revealed the terms of the settlement.
The Public Servants Association, which represents almost 240 000 public-sector employees, told News24 on Thursday it had briefed its lawyers to file a freedom-of-information request to access the confidential settlement.
But leaks to Daily Maverick suggest that the two sides settled for an initial payment of R600 million, with AYO buying back 5% of the PIC's 29% shareholding.
Abedian, a frequent commentator on good corporate governance who previously served on the president’s economic advisory panel, said PIC funds are part of the country's national savings.
"We cannot let it go so easily," he said. "Iqbal Survé and his organisation owe it to the nation, and to the public-sector employees in particular, to explain themselves, irrespective of the legal settlement."
AYO is an indirect subsidiary of Survé's Sekunjalo Investment Holdings. Sekunjalo has described the deal as "excellent news and in the best interests of all stakeholders", especially investors and pensioners.
Daily Maverick reported that the deal would see AYO buy back 5% of the PIC's shares at R20 a share, totalling R600 million.
According to the report, the Government Employees Pension Fund (GEPF) would also have the option of selling another 5% of shares back to the IT group in three years at R20 a share. The GEPF will also get two seats on AYO's board.
If the DM's reports are correct, the deal values AYO's shares at more than four times their current market price of R4.65 a share.
AYO should be able to pay the R600 million. Its most recent financial statements show it has around R1.1 billion in cash on hand.
The IT group has a market capitalisation of R1.5 billion. Were its shares to trade at R20, however, it would be worth around R6.6 billion.
Business Day, meanwhile, reported on Thursday that a legal opinion provided to the PIC advised it to settle its dispute with the IT group due to slim chances of recouping its full investment.
Cut short
The asset manager bought 29% of the AYO shares for R43 a share in December 2017, days before the IT group listed on the Johannesburg Stock Exchange. AYO's stock has fallen by around 85% over the past five years from R43 to R4.65 a share.
The PIC's court case started in early March this year, some four years after the PIC lodged its claim. Lawyers for the PIC argued that AYO misrepresented its plans for the R4.3 billion investment and oversold its business ties to BT-SA (formerly British Telekom). AYO denied misleading the asset manager.
But just two weeks into what was set down as a four-week case and with only a handful of witnesses called, the two sides clinched a confidential deal.
The case was settled before AYO called any of its defence witnesses.
READ | PIC's shares in Iqbal Survé-linked IT group AYO's were worth R300m, not R4.3bn - expert witness
Abedian said that, for the sake of transparency, it was important that the agreement be made public and that unions represented by the GEPF and the PIC have a say.
The PSA's acting deputy general manager for members' affairs, Reuben Maleka, said the PSA did not know what the terms of the settlement clinched behind closed doors of Friday were.
The union had previously criticised the manner in which the PIC, as a plaintiff, "settled this matter in secrecy".
"The PSA will leave no stone unturned to obtain the facts relevant to this matter," it said.
The PIC, meanwhile, is keeping tight-lipped for now. In a short statement, it said the deal "best protects the interests of [AYO's] stakeholders" and gives the IT group "a chance to create growth and value into the future".
"The confidentiality clauses in the settlement agreement bind the contracting parties," it added.
AYO said it was pleased that the litigation had been settled "amicably", and the two sides were "looking forward to their joint endeavours in creating growth and value in the business of AYO". It added the terms were confidential.
The GEPF, also a plaintiff in the case, referred all queries to the asset manager.
