EOH Holdings’ new black empowerment partner, Lebashe Investment Group, has said it won’t subscribe for a R250-million third and final tranche of a planned R1-billion investment in the troubled JSE-listed technology group.
“Lebashe took a conscious decision to allow EOH to establish a new independent board of directors without representation from Lebashe until after the conclusion of the ENSafrica investigation and the determination of the impact thereof,” EOH said in a statement late on Friday.
ENSafrica is probing malfeasance related to EOH’s public-sector business following revelations earlier this year, first reported by TechCentral, about a dodgy Microsoft software licensing deal with the department of defence and involving subsidiary EOH Mthombo. That deal prompted an investigation by the US Securities and Exchange Commission following a complaint from a whistle-blower that led to the US software giant terminating its business relationship with the South African group.
As a result of Lebashe’s decision, EOH said it is entitled, at its discretion, to require the forfeiture of dividends on 10 million EOH A Shares to EOH and to redeem 10 million EOH A Shares for R1.
“While the current economic dilution of the 10 million EOH A shares is limited, the EOH A shares each have the same voting rights as an EOH ordinary share and are therefore an important consideration in the deliberations of the new board. Further announcements will be made as soon as a decision has been made by the new board,” EOH said.
“Notwithstanding the decision taken by Lebashe not to subscribe for the third tranche in accordance with the transaction terms, the investment and strategic relationship with EOH remains important to Lebashe and it has committed to still providing the last tranche of funding … subject to agreeing mutually acceptable terms and EOH shareholder approval, if required,” the group added. “Discussions between Lebashe and the new board are ongoing with a view to finding a solution that is in the best interests of all capital providers.”
EOH CEO Stephen van Coller said: “We have enjoyed a valuable partnership with Lebashe over the years and look forward to exploring new, meaningful ways of evolving our collaboration for the benefit of EOH and Lebashe.”
Under the first and second tranches of the deal, Lebashe last year invested R750-million in EOH. These investments, together with its shares already held in the group, took Lebashe’s stake in EOH to 29%.\
EOH will reported its results for the year to 31 July on Tuesday. It will report a headline loss of R16.81/share (R13.52/share from continuing operations), it said after markets closed last Friday. — © 2019 NewsCentral Media