Capital Managers Botswana (CMB) has presented its side of the story in a week in which Botswana Public Officers Pension Fund (BPOPF) sources are accusing the trouble-ridden asset manager of inflating Mascom stock in their valuation two years ago.
The accusations come in the wake of an attempt to sell part of Econet shares at Mascom to BPOPF. In his counter argument, CMB managing director, Rapula Okaile produced what he claims to be the only correspondence shared with the BPOPF chief executive Office, Boitumelo Molefe, at the time, pointing to the contrary.
Rapula says the decision to share the confidential correspondence with Mmegi was due to recent spate of attacks on CMB and himself, through various media outlets by a certain element at BPOPF.
He alleged that such an element had resorted to lies week in, week out, in its mission to pursue and destroy CMB.
In the latest media reports, CMB is accused of inflating Econet and Mascom valuation in 2017, in what is perceived in some quarters as attempt to rush the BPOPF into splashing USD 50, 305, 926, as seven percent of Econet’s shares at the time.
Okaile told Mmegi that his letter to Molefe had clearly stated that the figure originated from Econet’s own valuation of Mascom.
The valuation had put the figure at USD 731, 190, 781z while CMB had also warned BPOPF CEO that at the price being offered, the stock was way over-valued and that it should be lower’ in their view (CMB’s).
In January 2017, CMB also advised BPOPF CEO that they (CMB) are of the view that Econet had over-priced the stock and that the price would have to be renegotiated.
The CMB letter says in part about the Econet offer, “It represents a 10.4 Ebitda multiple of the annualised September Q3, 2016 results– in our view, not an appropriate basis for valuation”.
Okaile further emphasised the stock over-pricing concern, when he wrote, “as per the valuation, it would mean that 7% of Econet shares at Mascom represent almost a third of its total shares at Econet (Zimbabwe). “ The implication is that it would be better to buy Econet itself and strip up Mascom and resell Econet’s remaining assets”.
In the letter availed to by Mmegi, CMB’s jitterbug about Econet’s valuation of Mascom is revisited in several paragraphs. In yet another portion of the letter, CMB stresses the point when it observed, that “Econet’s valuation of the shares is aggressive”, and that the price may have been close to the fair value if their reacquisition were to result in BPOPF’s majority ownership of Mascom.
“These shares however are indirect and have no rights attached to them, specifically relating to Mascom, therefore the valuation should be lower,” advised Okaile.
But what was in it for BPOPF? In the same letter CMB saw as the deal providing opportunity for BPOPF to unlock the value tied up in Mascom’s control structure. “One possible outcome would be to push for Mascom to be a listed entity and for the BPOPF and MTN to agree to hold not more than 40% each, with the balance going for the free float”, CMB’s letter to Molefe read.
In the same letter CMB advised the BPOPF about the unfair exploitation of BPOPF capital tied up in Mascom by MTN. CMB claimed that the arrangement did not allow any process to maximise the value of the capital, something that CMB viewed as prejudicial and unfair to
Contrary to allegations being peddled by ghost BPOPF source, in the media last weekend, suggesting that CMB had tried to rush Molefe into the deal over night, Okaile said it is clear in the letter that CMB did not desire to commit the BPOPF CEO into any errors. And that they (CMB) had advised Molefe to produce a flexible, non -committal response that would give the BPOPF and CMB, the leeway to exit the process if need be.
He further Rapula said the CMB letter clearly stated that CMB only wanted BPOPF to make a decision in principle only and then make an offer to Econet by close of business the following day.
The CMB letter reads in part, “ such an offer would take the form of a term sheet; the offer will be subject to the approval of the investment committees of BOP and the BPOPF board if necessary- in other words we would have enough leeway to walk away from the deal, should that become the desirable outcome,” said the CMB letter.
The letter also indicated that CMB had proposed that after purchase, the shares could be transferred to BPOPF and not be held by CMB’s investment vehicle, BOP.
“You can see for yourself; CMB never made any valuation of Mascom shares contrary to BPOPF’s smear campaign. We never tried to force them into accepting the Econet’s offer within one day as it is alleged; our letter was brief and to the point, and had the broader interest of the BPOPF at heart. We even alerted Molefe that the offer price by Econet would need to be negotiated down as we clearly demonstrated to her that it was unreasonable.
We were also alive to the existing economic opportunities for Botswana, if BPOPF were to unlock the Mascom control structure and cause the company to list on the Botswana Stock Exchange for Batswana,” Okaile said.
For her part Molefe said she had no idea if they CMB did Mascom stock evaluation for Econet, as she was not given any information in this regard.
Asked if they indicated to CMB that it had inflated stock valuation, she said BPOPF agreed that the offer price was not in line with recent valuations and that it was not attractive. Molefe said they did not report CMB’s inflated stock as attempted fraud by Econet/CMB.
“It was not reported at all. It was an offer transaction that was unsuccessful. We did not regard it as fraud. As the PE manager, it was not unusual for entities to approach them with possible investments for the BOP,” Molefe said.
In his letter, Okaile claimed that he was the author of the offer letter to the BPOPF CEO, but denied that CMB ever made any stock valuation of its own. He said the offer was tabled by Econet and he in fact advised BPOPF CEO that it was very overpriced.
In response Molefe said: “Once more, I cannot comment on the process that led to the sale offer as I was not privy to it. It is up to him to provide you with evidence that he advised against the sale offer. BPOPF received no such communication from him”.