Gold Reef investors fuming

Tsogo Sun's intention to acquire Gold Reef has been on the cards for about two years.

With the consortium offer, the empowerment shareholders, who would have had their 25% equity valued at R2.3bn for the purpose of the transaction, were looking forward to an easy and hurdle-free way to cash in and still stay invested in the Gold Reef business.

Among those who would have been in line to rake it in are heavyweights Reuel Khoza, Mzolisi Diliza, Dudu Kunene and Richard Moloko and their empowerment vehicles, which collectively hold 80% of the BEE stake.

The other BEE shareholders in Gold Reef are black groupings in other provinces in which the company has operations.

Moloko, who represents the entire black interest in Gold Reef, says their support for the deal had been unanimous.

Bizana Ngezi, a Free State businessman who has invested in the Goldfields Casino in Welkom, says the deal was supported by all the investors in the province.

Moloko says suggestions that he was looking to line his pockets and did not put the best interests of minority shareholders first were "ludicrous".

'Best on the table'

"This offer was the best on the table and even Tsogo knows that our shareholders could not get this price anywhere in this market. They just want to be spoilers and anyway our shareholders did not want to wait long before they could be paid out," says Moloko.

He suggests that selling to Tsogo would have attracted a significant risk of disapproval by the competition authorities owing to market concentration.

Not so, contends Tsogo Sun, which has filed a submission with the Gauteng Gambling Board (GGB) objecting to the proposed sale of Gold Reef to the consortium led by Ethos Private Equity, Goldman Sachs (Bidco) and the casino group's senior management.

In terms of the offer, Bidco would acquire the entire issued ordinary share capital of Gold Reef (other than treasury shares) for a cash consideration of R34 a share. The purchase consideration equates to an enterprise value of approximately R11.4bn.

The offer is backed by a fully committed financing package provided by a group of banks, including Goldman Sachs and Nedbank Corporate.

Bidco will also fund the underlying debt in Gold Reef.

Tsogo alleges that the senior management team of Gold Reef received improper inducements to accept an inferior offer of R34 a share from the private equity consortium.

It says its better offer of R34.50 a share (R12.1bn) never even came in for consideration.

It also contends that Gold Reef management knew of its offer and that if it did not inform its board and shareholders, then those directors who knew of it were in breach of their fiduciary duties.

Refuted claims

Tsogo has also argued that the proposed deal with the private equity group would result in the dilution of BEE shareholding in Gold Reef as no guarantees had been worked into the deal to guard against such dilution.

It has also argued that the GGB is not properly constituted and is therefore not qualified to consider any applications before it. It indicated that it would go to court to challenge the validity of any decisions taken by the GGB as the board's members did not include a chartered accountant with five years experience, as required by law.

Tsogo director for strategic planning, Marcel von Aulock, said on Friday that the company would go through with the threat of legal challenge if the concerns in its submission were not attended to.

Tsogo says in its submission that it has been approached by the JSE's securities regulation panel to submit information at its disposal for investigation and that such an investigation had commenced.

It urges the GGB to postpone the hearing on the proposed Gold Reef deal until after the completion of the investigation.

The Gold Reef board said in a statement refuting the claims by Tsogo that it had conducted a comprehensive formal process for the purpose of soliciting the highest offer for Gold Reef. At no stage during this process did it receive an offer of R34.50 from Tsogo nor a firm intention to make such an offer.

Gold Reef also said it was in discussion with the securities regulation panel.

The proposed transaction was unconditionally approved by the Competition Tribunal on December 19.

The GGB said it would look at the Tsogo submission and convene on January 30 for its decision.

- City Press