A South African firm has emerged as the bidder favoured to take over Pula Steel, ending nearly two years of legal wrangling over the country's pioneering steel plant.
The Verma family, who founded Pula Steel in 2015 and held 22% equity at its liquidation in October 2017, recently dropped their long running fight to regain control of the Selebi-Phikwe plant.
During the battle, the Vermas alleged they had been muscled out of Pula Steel by a conspiracy involving other shareholders and senior government officials.
The family, who occupied the top structures of the plant when it operated, lodged several unsuccessful legal challenges against the liquidator claiming bias and laying pre-emptive claims over some of the assets being liquidated.
The Vermas filed a rival bid for Pula Steel and revised it upwards at the last minute, apparently to beat the South African firm. A recent meeting of creditors voted against allowing the Vermas’ revised claim and approved the South African offer. The Vermas then filed an urgent High Court case to block Pula Steel’s liquidator, John Hinchliffe from finalising a deal with the South African firm. “He (Deepak) came to me after we first appeared in the High Court on urgency and said he was pulling out of the pursuit,” Hinchliffe confirmed to BusinessWeek.
“He said he had had enough and was refocusing on other opportunities.
“I can also confirm that I have received formal communication that they are withdrawing.”
Former Pula Steel director, Deepak Verma also confirmed that the family had abandoned the pursuit of their brainchild.
Documents seen by BusinessWeek indicate a level of antipathy by some creditors towards the Vermas. Creditors overwhelmingly voted against the Vermas’ revised offer and sided with the South African bid at the recent meeting.
At the meeting, Verma had pledged to create 5,000 jobs at Pula Steel, saying the trading conditions for the mothballed plant were now conducive. At its closure, the plant had about 100 workers.
The South Africa bidders, meanwhile, said they wanted to not only buy Pula Steel but expand it to process iron ore. The bidders already own a huge steel smelting plant.
Meanwhile, BusinessWeek is informed the total offer from the South African firm is about P26 million, a far cry from the estimated P130 million cost for building Pula Steel in 2015. Documents indicate that an August 2018 valuation of the assets on sale, including land, placed Pula Steel’s value at just under P30 million.
With creditors owed an estimated P100 million, the sale to the South Africans will yield only a few thebe to the pula they are owed. Commissioned with much pomp and fanfare as the country’s first steel plant, Pula Steel operated in fits and starts due to financial and technical challenges, particularly the shortage of its raw material.