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A legal battle between Hosken Consolidated Investments (HCI) and SA's lottery operator Ithuba is part of an attempt by HCI to stage a hostile takeover via a back door, Ithuba CEO Charmaine Mabuza told Fin24 on Monday.
JSE-listed HCI [JSE:HCI], an investment holding company, is set to bring an urgent application in the Gauteng High Court in Johannesburg on Tuesday against Ithuba, its management consultant Zamani Marketing and Management Consultants (owned by the Eric Mabuza Trust and the Charmaine Mabuza Trust) and shareholders in these various entities. Zamani is a shareholder in Ithuba.
City Press reported on Sunday that HCI claims Zamani is paid an "inflated" 4.67% of total lottery sales each month to run Ithuba. HCI claims the fee – which amounts to millions of rand - should be 3%, the newspaper reported. In its urgent application set for Tuesday, HCI wants the court to order that the monthly Zamani monies be paid into a lawyer's trust account instead.
Fin24 contacted HCI for comment on Monday, but at the time of publication none had yet been received. This article will be updated if and when HCI responds.
Charmaine Mabuza told Fin24 on Monday that the respondents are opposing the urgent application, arguing that it is not of an urgent nature. Furthermore, in her view, HCI has no right to prevent Ithuba from paying the 4.67% to Zamani.
In 2014 Ithuba won the bid to run SA's lottery operations for eight years. HCI advanced a loan of R341m to Ithuba at the time. City Press reported that, according to HCI, Ithuba needed the loan to qualify for the tender, since banks would not lend it money due to the award of the tender being contested by the previous operator.
According to Mabuza, the Ithuba board decided to repay HCI's loan in full at an earlier stage than the due date of April 2020. She says this was because Ithuba just wanted to stop HCI from trying to "interfere" in the running of its (Ithuba's) business.
HCI, according to City Press, claims the loan agreement included certain terms which would kick in if the loan is repaid before its full term. HCI claims it has obtained certain rights to have a say in the running of Ithuba operations, in terms of the loan agreement. The early repayment of the loan came up in an earlier arbitration, which found for HCI. Mabuza, however, told Fin24 on Monday that Ithuba does not agree with the arbitration ruling.
"In my view, this [Tuesday's urgent application] is an attempt by HCI to create some sort of 'justification' for why it should come in and manage Ithuba. And this while Ithuba is actually a very well-run company," (Charmaine) Mabuza said. "By wanting the court to order Ithuba to pay (Zamani's monthly payment) into a lawyer's account, HCI wants to make things difficult for Zamani so that it (Zamani) cannot run day-to-day operations."
She said it was because HCI did not "want to stay out of Ithuba's business" that the board decided to repay the loan sooner.
"We have made it clear that it is not about HCI running any financial risk in terms of a 5-year voluntary loan it (HCI) made to Ithuba after it won the lottery bid," said Mabuza.
