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Ayo execs quit as major deal hangs in limbo

Aug 26 2018 07:42
Dewald Van Rensburg

More than half the board of Ayo Technology Solutions resigned this week, including CEO Kevin Hardy and chief investment officer Siphiwe Nodwele.

Hardy and Nodwele quit without warning “with immediate effect”, according to an announcement on the JSE news service Sens on Friday.

This development suggest that Ayo’s flagship deal – to acquire 30% of British Telecoms SA (BTSA) for R1 billion from its own parent company – has, for some reason, collapsed.

Hardy left BTSA to join Ayo in anticipation of the deal, which was the basis of Ayo’s entire business plan.

No reasons were given, but the executives’ resignations follow shortly after four non-executives and Ayo’s company secretary stepped aside on Tuesday to appease shareholder concerns about the board’s independence.

Ayo controversially received R4.3 billion in funding from the Public Investment Corporation (PIC) when it listed on the JSE late last year.

This was despite internal PIC worries that the state-owned asset manager was paying far too much at R43 a share – now worth R26 each.

PIC staff had also expressed reservations about the overlaps between the boards of Ayo and its majority shareholder, the JSE-listed African Equity Empowerment Investments (AEEI).

“Some of the board members ... are closely linked to AEEI. Thus, there may not be a clear balance of power at board level,” PIC staff had said, according to internal memos City Press has seen.

Khalid Abdulla, Walter Madzonga, Telang Ntsasa and Mbuso Khoza all stepped down from the board to be replaced with new, independent members, Ayo had announced this week.

Company secretary Nobulungisa Mbaliseli had been seconded from AEEI and has returned to the parent company, said Ayo.

Both AEEI and Ayo are ultimately controlled by media mogul Iqbal Survé.

The listing of Ayo was accompanied by a private placement of shares which was entirely underwritten by the PIC.

The main purpose of this investment was for Ayo to buy AEEI’s 30% of BTSA – a massive cash infusion for a related party.

More of the PIC money was to be used to benefit AEEI and Survé as follows:

. R80 million went to AEEI to pay off an inter-company loan;

. Another R57.7 million in “placement fees” went to a wholly owned subsidiary of AEEI; and

. A recurring management fee of R7 million a year will go to AEEI, adjusted for inflation.

This helps explain why the AEEI share price dropped by 11% on Friday after the announcement of Hardy and Nodwele’s resignations. Ayo’s shares are highly illiquid and did not respond at all.

The BTSA deal has mysteriously stalled, despite involving only related parties and the PIC being the only shareholder which has to approve it.

Hardy did not answer his phone or respond to an SMS. Nodwele said he could not comment.

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