Brett Kebble
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JCI investors await a "miracle" deal
Allan Seccombe
Posted: Mon, 19 Jan 2009

[miningmx.com] -- JCI’s long-awaited takeover by Randgold & Exploration has been delayed by two weeks because of hopes kindled by a core of shareholders that a deal could be struck in a long-running, multi-million rand dispute with Investec.

Monty Koppel, a long-standing opponent of Investec’s claim, was at the heart of the core of shareholders asking for the two-week window to give talks with Investec a chance of resolution.

Koppel’s barrister and representative of shares in JCI in excess of 25%, Denis Daly, told a full room of JCI shareholders and interested parties gathered to vote on the R&E transaction that a significant sum – he mentioned R100m – could be knocked off the R373m fee to be paid to Investec.

Investec was not at the meeting.
We will vote the merger down today
Investec loaned JCI R460m at the time Brett Kebble and other directors were ousted from the board in August 2005 because of financial irregularities and the non-submission of audited financial figures. The loan agreement included a profit-share or raising fee on the disposal of JCI assets.

The interpretation of the loan agreement has become a contentious issue between the suspended JCI, Investec and Koppel, who claims to represent 20% of JCI’s shareholders.

Koppel via Letseng Holdings (the former 76% owner of Letseng Diamonds) has had a long-running battle with Investec to reduce the financial company’s claim of R575m. JCI’s board under the leadership of Peter Gray has provided for R373m as a repayment to Investec.

Daly dangled the carrot to shareholders about to vote on the merger proposal that the Investec fee, which is subject to talks, could be R100m less and bluntly stated if these talks weren’t given two more weeks to be concluded the 25% of shares he represented at the meeting would vote against the merger.

Another two large shareholders backed the request for the two-week adjournment. One calculation put the percentage of the shares represented at the meeting giving their backing to the adjournment at 41%. This meant JCI would not receive the 75% approval it needed for the merger.

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More than 95% of R&E shareholders voted in favour of the merger earlier in the day as a way to resolve claims of up to R14bn R&E has against JCI, whose net asset value is slightly more than R1bn. The claims stem from fraudulent transactions committed under Kebble’s leadership of the two companies.

During a break while chairman Vincent Maleka decided the adjournment request, debate was vigorous amongst groups of shareholders about what exactly Koppel stood to gain from the adjournment and settlement of the Investec loan outside a merged entity.

One school of thought is that Koppel will at least be paid the expenses incurred in the single-handed legal battles with Investec.

Some scoffed at the idea that Koppel had altruistic motives, wanting to improve the lot of all JCI and ultimately R&E shareholders by wringing as much money as he could out of Investec.

They questioned what exactly his motives were. If there was an agenda Koppel and Daly were giving nothing away. Daly stressed at the meeting there were no personal or sectarian motives in finalising the Investec dispute.

“We will vote the merger down today if we’re not given that opportunity,” he said. “We want it (the merger) too, but we want to resolve those final issues.”

Some shareholders thanked Koppel after the meeting for the stand he was taking against Investec. It’s understood the 95 JCI shares for one R&E share swap ratio will remain unchanged if Koppel succeeds.

What was blatantly clear though is that Koppel used the threat of blocking the merger as a lever to force Investec’s hand and reduce its demand.

“If there’s a two-week guillotine that’s going to come down then people will be focused,” his barrister Daly told journalists on the sidelines of the meeting.

R&E CEO Marais Steyn said he couldn’t understand why the Investec impasse wasn’t carried into the merged entity and resolved there rather than have a two week delay on the voting process. He said JCI shareholders could be waiting two weeks for a “miracle deal”.

Steyn later told Miningmx that a merged entity would be far more powerful and focused when dealing with Investec than as two companies grappling with a merger.

A representative of South Africa’s four large banks and holders of some 500 million JCI shares also opposed the delay, saying the whole process had dragged on for too long.

David Palmer, a holder of 144 million JCI shares, said investors had already waited more than 1,000 days for a resolution of the R&E claims and Investec’s claims, and 14 days more weren’t material.

Shareholders meet again on 2 February in Sandton, Johannesburg to vote on the merger.