Johannesburg - Letseng Holdings walked away triumphant after the merger between JCI and Randgold & Exploration (R&E) was voted down by shareholders at the latest instalment of scheme meetings held in Johannesburg on Thursday.
The Letseng group, represented by Monty Koppel, scuppered an earlier vote on the R&E takeover of JCI. It was designed to settle R14bn in legal claims against JCI for fraud perpetrated by the late Brett Kebble and other board members.
JCI and R&E both had their shares suspended from trade in 2005 for failing to submit financial results. Kebble was shot dead in September of that year. R&E alleges it is the victim of widespread fraud and theft, unprecedented in South African commercial history.
Koppel is engaged in a legal battle with Investec over a loan the company advanced JCI, as well as the financial claims Investec is now making against JCI's assets.
Koppel fears that if Letseng approves the merger as things currently stand, its legal case against Investec will be dealt a fatal blow.
In the failed meeting in February, JCI directors unveiled the highlights of a last-minute deal with Investec, according to which the banking group knocked R100m off its claim against the suspended mining group and capped the amount at R275m.
It was a major advance from the R575m Investec said it was claiming and the R373m JCI estimated it had to pay. Koppel objected that Letseng, which has waged its legal battle against Investec single-handedly, was not privy to the deal.
The South African courts sided with Koppel, set aside the vote against the merger and instructed the parties to try again.
The merger proposal would have resulted in JCI shareholders receiving one R&E share for every 95 JCI shares they own. JCI would then be delisted and R&E could resume trading.
In March, the vote was postponed after signs that an agreement between the four parties - JCI, Letseng, Investec and R&E - could be finalised in the coming weeks.
These sentiments were replaced with acrimonious accusations and disagreements at Thursday's exceptional general meeting of JCI shareholders.
"The ability to settle was thwarted by regulatory challenges, and would not have been possible without putting counterparties at some risk. Letseng is still of the view that a merger with Randgold would be good, but at this point it is an unachievable goal," Koppel's legal counsel Dennis Daly said.
He said parties were under a protocol of confidentiality, but indicated there had been a "wholesale failure" to deal with resolving the litigation between Letseng and Investec.
"So far, Letseng has done all the running to protect JCI. If the merger goes ahead without the litigation resolved, the fence Letseng has put up to stop Investec from claiming its money will be taken down. JCI will lose Letseng's protection," Daly said.
Palpable disappointment
JCI CEO Peter Gray said the company recommended shareholders to vote in favour of the merger. "The best resolution for everyone is the merger. It is the most elegant solution," he said. He asked shareholders to end a process which has been dragging on for four years.
A minority shareholder accused Koppel of holding the process to ransom for his own personal gain, and not acting in the interest of all shareholders.
The feeling of disappointment was palpable as the chairperson announced the results of the vote. Of shareholders present, 61% voted for the merger, failing to reach the 75% required.
A JCI minority shareholder told Miningmx after the vote that he was reaching the limit of his patience. "The shares haven't been trading for four years. I'm getting fed-up. I just want to sell my shares in this bloody company," he said.
Gray told Miningmx he would be convening meetings with the major players as soon as possible to discuss the way forward, maybe even over the Easter weekend.
Spokesperson for R&E Brian Gibson said the results of the meeting were no surprise, but were nevertheless a disappointment for R&E. "The merger would have been to the benefit of the majority of shareholders," he told Miningmx.
He said the companies will regroup and the options include exploring an alternate settlement or arbitration.
"Arbitration would be the worst possible outcome. It's time-consuming, costly and shareholders are getting frustrated," he said.
Gibson said the bare bones of a settlement had been discussed in the past and would be used it as a framework to get the ball rolling. Failing that, arbitration would take two to three years.
- Miningmx.com
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