Wesizwe is being "hijacked"

Allan Seccombe | Thu, 03 Dec 2009 02:00
[miningmx.com] -- A R260m funding proposal by Musa Capital Advisors for Wesizwe is nothing less than a strategy to take total control of that company’s platinum assets and the board has been restructured to allow this, former Wesizwe CEO Mike Solomon and ex-chairman Rob Rainey said in court papers.

In court papers contesting their dismissal from the board, Solomon and Rainey outlined what they regarded was the ultimate strategy but they did not include a copy of the document called the Term Sheet, which details the funding proposal. The exact details are unknown at this stage, but Solomon was clear the intentions of the proposal are sinister.

“It is quite apparent... that the introduction of the term sheet is simply part of the ongoing stratagem devised by Musa to obtain total control of the valuable mining asset owned by the First Respondent [Wesizwe],” he said in the papers.

The application document listed Wesizwe Platinum and directors Ezekiel Monnakgotla, Disele Phologane, Iraj Abedian and Nyasha Tengawarima as respondents. The last two names are Wesizwe’s chairman and acting CEO respectively.

“The potential prejudice and harm to the Respondent [Wesizwe]... will be immense as a result of the hijacking of the board of the First Respondent [Wesizwe] by the Second to Fifth Respondents,” Solomon said in the documents.

Tengawarima said in an opposing affidavit the respondents denied many of Solomon and Rainey’s claims. Tengawarima criticised Solomon and Rainey’s decision not to attach the Term Sheet to their application, which meant the respondents couldn’t fully deal with the allegations levelled at them.

Tengawarima said Solomon and Rainey’s “ulterior motive” was to “ place themselves in a better bargaining position in relation to their exit from the board of directors.”

The court case was withdrawn on 12 November by Solomon and Rainey in favour of letting shareholders decide their future at Wesizwe on 17 December at an extraordinary general meeting called by a group of shareholders concerned about corporate governance issues within Wesizwe.

Solomon, arguably the face of Wesizwe, and Rainey were dismissed on 3 November, following on from the failure of shareholders at the company’s AGM on 12 August to re-elect four non-executive directors to the board. Solomon contends that the exit of the four directors was due to shareholder apathy that allowed a faction of shareholders to change the board.

MUSA CAPITAL

The changes are regarded to be largely orchestrated by Musa Capital Advisors, which is listed as a director along with its principal member Antoine Johnson of Newshelf 925.

Musa Capital helped engineer the transfer of 43.85 million shares out of the Bakubung-ba-Ratheo community’s shareholdings into Newshelf 925, which has no community members listed as a director. Newshelf acquired some 26 million more Wesizwe shares from former Wesizwe chairwoman Thuthukile Skweyiya. The exact nature of that transaction is unknown at this stage.

The Bakubung and Newshelf 925 own 12.6% and 11.96% of Wesizwe respectively. The Bukubung are represented on the board by their chief or kgosi, Ezekiel Monnakgotla and Disele Phologane. Johnson and Phologane are said to be close. According to board minutes submitted by the respondents, Monnakgotla missed at least three crucial board meetings in October and November.

The Term Sheet, signed by Johnson and Phologane laid out a deal in which two special purpose vehicles put together by Johnson called African Continental Resource Ventures and Ring Master Trade and Investments 4 receive preference shares worth R260m offered by Wesizwe subsidiary Bakumin, which holds the platinum assets, Solomon said in the legal papers.

THE DEAL

These would be redeemable, convertible cumulative preference shares with a five-year term. There would be a 23% coupon. A 6% advisory fee would be payable by Bakumin to Musa Capital and the Industrial Development Corporation, he said.

“I was advised that the term sheet had serious short comings in that it was in reality directed at vesting control of the valuable assets owned by the First Respondent [Wesizwe], being Bukamin, in the hands of the Musa faction,” Solomon said.

Tengawarima was noted in 2 November board meeting minutes as saying some of the terms and economic parameters, like the coupon rate, the conversion premium, security, control and timelines “require re-negotiation.” This was after Nedbank had studied the Term Sheet. Tengawarima and Julian Williams, a board member, were tasked with re-negotiating the Term Sheet.

In the answering affidavit, Tengawarima, in specific response to Solomon's claims said: "The allegations... are denied."

Africa Wide and Biotrace Trading 60, holders of 7.8% and 1.8% of Wesizwe’s shares respectively and who are the shareholders who called for the EGM and the return of the old board, said they are concerned about the behaviour of certain members of the current board.

The financing proposal outlined in the Term Sheet is underpinned by the collateralisation of the Bakubung’s remaining unencumbered shares, some 73.6 million Wesizwe shares, to the bank in return for which security the bank has loaned money to this consortium at an undisclosed rate, Africa Wide and Biotrace said in a statement.

“Africa Wide is also concerned that one shareholder, seemingly under the influence of its advisor Musa Capital, is trying to force deals through the Wesizwe board to the detriment of other shareholders,” Mlibo Mgudlwa, Africa Wide’s CEO, said in a statement.

“It seems as if that any director that opposes the Musa Capital financing proposal is kicked off the board and replaced by certain “friendly” nominees. After we raised our concerns in our letter to Wesizwe, and after no satisfactory answer was forthcoming, we initiated the process of calling a general meeting of all shareholders.”