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Mphoko would not accept a hostile takeover bid

by Staff reporter
06 Jul 2018 at 16:25hrs | Views
THE battle for the ownership and control of supermarket chain Choppies Zimbabwe - on paper owned 51% by Nanavac Investments run by former vice-president Phelekezela Mphoko's family and 49% by Botswana's listed Choppies Enterprises Limited backed by that country's former president Festus Mogae - intensified this week, with the Zimbabwean shareholders moving to boot out 50 Indian workers seconded to the local operation with 32 shops across the country.

This came as Mphoko warned he would not accept a "Gupta-style" hostile takeover bid by the Botswana shareholders led by company chairman Mogae and chief executive Ramachandaran Ottapathu who holds 34,2% equity in the group.

Mphoko, who lost his position when former president Robert Mugabe was toppled by the military last November and replaced by his then fired co-deputy Emmerson Mnangagwa, said "unlawful" seizure of the company would not be tolerated and would be resisted by legal means.

"The law is very clear. We held a 51% stake from the beginning because retail is a reserved sector under the law in Zimbabwe which may have changed, but still protect our rights in that specific area," Mphoko said in an interview yesterday. "Anything else is illegal. These guys are trying to Gupta (rob) us, but their Gupta theories and approach won't be accepted and won't work."

The Guptas are a wealthy Indian-born South African family whose most notable members are the brothers Ajay, Atul and Rajesh "Tony" Gupta. They were involved in dodgy business deals and embroiled in allegations of corruption in South Africa during former president Jacob Zuma, their benefactor's term.

While Mphoko vowed to dig in, Choppies Enterprises said it would invoke clauses in the shareholders' agreement to buy back 44% from the Mphoko family at nominal value.

In an interview this week, Ottapathu, known as Ram in business circles, said the multinational retail group feels it is time the Mphokos exited the business for them to assume 100% ownership and control.

"At a board meeting in 2014, the former vice-president complained that shares they held in Choppies, 7%, was too small. His son (Siqokoqela) corrected him on that. It is recorded as part of minutes for that meeting," Ottapathu said.

"With all this that has been taking place and with the shareholder feeling the situation is now ripe to take over the business because the indigenisation laws are no longer as they were in 2013, the shareholders are considering exercising their rights as per the agreements, meaning to recall the 44%, while at the same time buying Siqokoqela out on the remaining 7%."

On the shareholding structure, Ottapathu added: "We can't continue with the 51% deal; we agreed at the time they would get 7% for helping us set up business in Zimbabwe. They have all along been getting dividends based on the 7% they actually hold."

However, Mphoko said: "They want to undermine Zimbabwe's laws and us as locals, they are crazy. The President (Mnangagwa) has been clear on what the policy and the law now are on this issue; so we won't allow them to rob us."

Mphoko said last week Ram was trying to rope in Mnangagwa and government to revisit the shareholders' agreement and other documents, insisting his family is the biggest shareholder in Choppies Zimbabwe operations.

Mphoko is a 25,5% shareholder in Nanavac, a vehicle he, alongside his son Siqokoqela, formed to do business in Zimbabwe. Siqokoqela also holds a 25,5% stake, bringing this to 51%. Choppies Enterprises holds the other 49%, although it says the "51%" was only agreed to bypass indeginisation laws under Mugabe. In reality, Mogae and his allies, including Ram, say Mphoko was given 7% for free.

Ram says their agreement with "a call option" - choice to buy back shares - was signed on December 22, 2015.

Clause 3.1 of the agreement reads: "Out of the total 51% with the Mphoko family, Choppies will have call option on 44%, which (means) in turn the Mphoko family will have 7%."

"Upon exercise by Choppies of the call option, a sale shall be concluded in respect of the option shares on the following terms: (1) the purchase price of the option shares payable to Siqokoqela Mphoko shall be an amount of $1 (One United States Dollar) per option share; (2) All the benefits and risks of ownership of the option share shall pass to Choppies on the date of exercise of the call option; (3) Choppies shall procure that any share acquired by it in terms of the clause 3, shall be held as treasury shares for the exclusive purpose of disposal thereof to an indigenous Zimbabwean, as prescribed by the legislation prevailing at the time of disposal." Last week, the Mphoko family said it had, together with Choppies Enterprises, secured a $20 million bank loan in Botswana to finance the business, a claim Ottapathu says is ridiculous as Mphoko "can't get a loan for himself even for one rand!"

Mphoko insisted: "The law is very clear, the retail sector remains reserved for locals. So they can't be allowed to undermine the laws of the country as and when they wish."

Siqokoqela yesterday escalated the fight through a letter to Immigration Department principal director Clemence Masango, saying Nanavac will not extend work permits for 50 Choppies Zimbabwe foreign employees. However, he said Nanavac will only secure work permits for four Indian expatriates yet to be identified.

"Please, kindly be informed that the said Indian experts have successfully accomplished their mission of imparting knowledge to Nanavac Investments employees and Nanavac Investments will not extend their work permits," the letter says.

Source - the independent