Altech statement regarding its Econet investment
8 August 2005
Altech statement regarding its Econet investment:
Allied Technologies Limited (“Altech”) regrets that circumstances involving Econet Wireless Global Limited (“EWG”), in which Altech holds 50% plus one share of the equity, have necessitated the decision by Altech’s board to apply for a fair and equitable winding up of EWG or a court order that Altech should buy the interests of EWG’s other shareholders in EWG (or that they should buy Altech’s investment in EWG).
Altech is a listed technology group with a forty-year history. During that period Altech has enjoyed successful joint venture / partnership arrangements with several other companies, including certain leading international technology groups. In most of these arrangements, some of which have lasted in excess of 15 years, Altech has always adhered to good corporate governance principles and attaches significant importance to integrity, ethics and professionalism.
Altech is not litigious or vexatious and operates in a framework of fact. It does not react to damaging allegations and comments concerning it in the same spirit in which these were made in the press on 5 August 2005. It merely seeks to clarify the reasons why the relationship with the other EWG shareholders has broken down:
1. The main reason for the breakdown has been corporate cultural differences, a lack of implementation of good corporate governance, a difference of opinion on future strategy, and a breakdown of communication between Altech, the TSMI shareholders and the management of EWG.
2. With regard to Vodacom and Vee-Mobile Altech has never pressured EWG to enter into a transaction with Vodacom concerning Vee-Mobile in Nigeria. An approach was made to Altech in attempt to open up the possibility of negotiating a settlement of the dispute in Nigeria. Altech immediately approached the CEO of EWG to convey this to him and to ask him to obtain details of what was proposed, to analyse and report on it to the board of EWG, with a recommended course of action.
3. It is a fundamental principle of good corporate governance that any serious approach of this nature should be considered on its merits, in the interests of shareholders. In terms of the EWG shareholders’ agreement, the other shareholders of EWG (“the TSMI shareholders”) have the right to block any significant transaction involving EWG, and this was fully recognised by Altech. However, this does not avoid the need for a full, professional appraisal of any such proposal, with a recommendation for consideration by the shareholders.
4. This and other related behaviour led Altech to the conclusion that EWG, the day-to-day management of which is vested in staff appointed by the TSMI shareholders, would not adhere to proper standards of corporate governance or normal courtesy amongst shareholders in a joint venture.
5. Altech has been a pioneer in aspects of black economic empowerment within the technology sector in South Africa, in particular in facilitating empowerment equity structures and the financing thereof for its BEE partners. Altech does not condone racism and takes very seriously any allegations of racism amongst its staff.
6. Altech was not, and is at this stage still not, satisfied that the allegation of racism made by the management of EWG against its appointee as COO of EWG (its sole representative in EWG’s executive team) are justified. The alleged incident giving rise to these allegations took place some five months before they were raised with Altech by the CEO of EWG, during the height of the breakdown of the relationship.
7. The CEO of Altech intended to deal with this matter at the EWG board meeting of the 21st of June 2005 but was not afforded the opportunity to do so due to the fact that the directors appointed by the TSMI shareholders failed to attend that meeting. The very next day the unilateral act of suspension of the COO was implemented by the CEO of EWG. Altech’s actions in applying to the court to set aside this suspension are to ensure that its rights as the shareholder which appointed the COO are protected. Altech would never seek to avoid a proper investigation of the serious allegations and would ensure that this took place.
8. Detailed documentation concerning the racism allegations against the COO and his suspension, accompanied by an offer to purchase Altech’s shares in EWG at a price approximately equivalent to the price paid by Altech in 2004 has been given to Altech. This offer does not reflect the fair market value of Altech’s investment in EWG and was unanimously declined by the board of Altech.
9. Thereafter Altech received a communication from a lawyer representing the TSMI shareholders claiming that Altech, by its actions and conduct had repudiated the EWG shareholders’ agreement and that his clients were cancelling the shareholders’ agreement, as a result of that repudiation. This purported cancellation, which Altech’s internal and external legal counsel advises is entirely without foundation, is quite frankly absurd, and is one of the factors that has obviously led to the breakdown of the relationship between Altech and the TSMI shareholders.
10. The TSMI shareholders’ representatives on the board of EWG, at the next EWG board meeting, invited the Altech representatives to resign as directors of EWG, in view of the purported “cancellation” of the shareholders’ agreement. This invitation was declined by Altech. Subsequently, at a board meeting held on 4 August, there was an attempt to replace the CEO of Altech as chairman of EWG, on the same grounds.
In the light of all of the above extraordinary circumstances the board of Altech reluctantly concluded that the relationship between the shareholders of EWG had irretrievably broken down. In order to protect its investment it sought the relief provided by statute, in terms of a just and equitable winding up of EWG or an order for one shareholder to buy out the interests of the other in EWG for US$100 million.
With regard to the price of US$100 million proposed for this purpose, Altech is both a willing buyer and a willing seller. The excess of this price over Altech’s original US$70 million investment cost, is in Altech’s view, warranted.
Altech intends to pursue its original vision of developing interests in cellular network activities in Africa, either through the acquisition of the shares in EWG which it does not already own, or through the use of the proceeds of sale of its interests in EWG.
Altech is confident that it has acted in the best interests in its shareholders and has followed the correct corporate governance procedures that are expected of it.
For More Information Contact:
Paula Eugenio: Group Manager – Public Relations and Media
Fax: (011) 715-9044
Cell: 082 904 2988