The Competition Authority has given Choppies directors Ramachandran Ottapathu and Farouk Ismail the greenlight to dispose of nine firms linked to the retail giant, for P450 million.
A consortium of investors led by the Standard Chartered Private Equity Mauritius, is tying up the deal to buy Spark Capital, a company created to house the nine firms, most of which are Suppliers to the Choppies Enterprises.
Apart from their majority shareholding in Choppies, Ottapathu and Ismail also jointly own 94 percent of Spark Capital, with the remainder held by minority shareholders, mostly employees.
In a statement released this week, the competition watchdog said it has given the nod to the deal, as the proposed transactions were not likely to result in the prevention or substantial lessening of competition, or endanger the continuity of the services offered in the markets under consideration.
“The market structures in the services industry will not likely be altered, and as such they do not raise any competition concerns,” read the statement.
However, the CA said the approval did not override or negate any other mandatory statutory approvals or processes that any of the parties to these mergers must comply with under the Laws of Botswana.
Other investors in the buying consortium are an American based company, Development Capital Africa Master Fund and Botswana registered, Chalk Farm Investments, a company jointly owned by Collins and Newman lawyers, Rizwan Desai and Parks Tafa. Under the terms of the deal, Stanchart PE, which bought a 12.8 percent stake in Choppies in 2013, in a deal estimated to be worth $60 million, will buy 50 percent of Spark Capital, while Chalk farm will purchase five percent.
The Development Capital Africa Master Fund will take the remainder.
“The deal is worth around P452 million, but the final amount is still subject to audit valuations. Standard Chartered Private Equity will buy a 50 percent stake, while Desai and Tafa will jointly own five percent.
The current minority shareholders in Spark, will maintain their shares,” Ottapathu said in an earlier interview with BusinessWeek.
Companies currently housed under Spark Capital include Keriotic Investments, which distributes groceries to Choppies, ILO Industries grain (grain packaging), Honey Guide (milling company), Mediland Healthcare (Pharmaceticals distribution), Mont catering (Air conditioning supplies), Real Plastics (bottled water) and Angarappa (building supplies).
The lucrative disposal of Spark Capital comes just months after the two directors pocketed over P600 million when they sold shares each on the Johannesburg Stock Exchange (JSE).
In May this year, Choppies successfully placed 277 million shares at an offer price of R4.90 (P 4.02) per share on the JSE.
The offer comprised a placing of 117 million new subscription shares and 160 million existing shares.
Under the deal, Ottapathu and Ismail collectively sold 150 million shares and pocketed P602 million, while chairman, Festus Mogae was paid P40.1 million for the 10 million shares he sold.