Legal tussle looms in P3bn Mascom deal

A legal opinion sought by the Botswana Public Officers Pension Fund (BPOPF) on Zimbabwe billionaire, Strive Masiyiwas bid to take control of Mascom, points to a potential showdown that could hinder the P3billion deal.

The pension fund, which holds 40% in Mascom, sought legal advice after its major partner in Mascom, MTN, announced the deal to sell out to Masiyiwa’s Econet Group recently. Econet presently holds a seven percent stake in Mascom, which will increase to 60% should Masiyiwa’s transaction go through.

This week, authoritative sources close to the transaction told Mmegi that the counsel sought by the pension fund had suggested that they (BPOPF) could successfully challenge the deal under clause 12 of the shareholders’ agreement it has with MTN. The clause reportedly requires MTN to have given BPOPF the first offer of the shares being sold before any other party.

BPOPF and MTN’s shareholder agreement is under Deci, an investment vehicle which holds the majority equity in Mascom.


“The Board has already written to MTN to inform them that the proposed deal with Econet is unprocedural under clause 12 of the shareholders agreement,” a highly placed insider told Mmegi.

“MTN wrote back arguing not only that the clause does not apply in this instance, but also that they have signed a Non-Disclosure Agreement with Econet on the matter.

“This is an issue that has the potential to spiral into a legal tussle because the two shareholders do not agree on what should have happened and what should happen.” MTN bought into Mascom in 2005, via a deal reducing Econet’s stake. The 2005 deal reportedly had a backdoor clause under which Masiyiwa could bounce back into a majority holding at Mascom by having pre-emptive rights to MTN shares.

While the BPOPF is said to have dug in its heels on the matter, local laws limit the extent to which the pension fund can take additional exposure in a single investment. The Econet offer suggests a US$566 million (P6.1bn) valuation for Mascom and a US$226 million (P2.4bn) valuation for the BPOPF’s stake. Under the current pension fund rules, BPOPF can only take up an additional P500 million or so stake in Mascom, or just under 10% more. The pension fund, however, has the option of acquiring a larger stake and listing it publicly, in the interests of retaining Mascom’s value for citizens.

Masiyiwa, who was in Gaborone on Tuesday in a high profile engagement with President Mokgweetsi Masisi, also confirmed his plan to offer a portion of the stake Econet secures, to the public via a Botswana Stock Exchange  (BSE) listing.

Ahead of his visit, Masiyiwa had teased his plans for Mascom, saying he would make more revelations in Gaborone where he said the shares would be for anyone who can afford P100. Masiyiwa founded Mascom in 1998, bringing in Portugal Telecom as a technical partner and beating five other bidders.

“I came here 22 years ago and in my pitch, I had told government that I want to list Mascom on the BSE within three years,” he said at the very end of the two-and-half hour free-for-all youth meeting in Gaborone.

“At the time, I did not have enough shareholding to push that through and my partners kept saying we should wait.

“It has been 22 years and I have come to fulfil that promise. I want to fulfil that with your help. This company has 1.7 million customers and I’m calling on them to be ready to become shareholders.”

Seated next to Masisi, Masiyiwa said he hoped the BPOPF would equally offer a portion of its Mascom equity to civil servants.

“I hope my partner of many years, the BPOPF, opens the door to a structure creating a scheme for civil servants to also own shares.

“President Masisi, I am saying I want the broadest ownership possible at Mascom because that’s what I did with Econet in Zimbabwe.”

While some critics viewed the public meeting as a charm offensive by Masiyiwa to pressure regulatory approvals for the transactions and secure public buy-in for the proposed public listing, Masiyiwa’s statements reportedly left a sour taste in the pension fund’s mouth.

BPOPF analysts believe the P3 billion deal overvalues MTN’s stake and calls into question Masiyiwa’s plan to price the public listing “for anyone who can afford P100”. The pension fund’s analysts reportedly believe Econet’s unsolicited offer was designed to price them out of a possible challenge for MTN’s shares.

“There is a sense of the pension fund not being taken as a partner, but being taken for granted by parties in this transaction,” another source told Mmegi yesterday evening.

“In the first place, BPOPF learnt about this unsolicited offer from Econet in the newspapers, with shock, and MTN only came later to confirm the matter.

“Now Masiyiwa, sitting next to the President, is announcing that he will list on the BSE in October, when the regulatory bodies such as the Competition Authority and BOCRA have not even studied the deal.

“It’s being sold as a done deal, when the pension fund has not satisfied itself and when there’s the potential of a successful legal challenge on the basis of clause 12.

“Tuesday’s public meeting in particular has left a lot of trustees in the pension fund irritated.”

While BOCRA has reportedly received a notification of the deal from MTN, the Competition Authority has not yet and it takes anywhere between 30 and 90 days for the Authority to finalise assessment of a transaction, after the first notification.

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