WHEN Rainbow Tourism Group (RTG) majority shareholder Nicholas Van Hoogstraten’s dispute with the hospitality group’s directors’ started in 2005, it was evident that at least one party would end up a loser.
Last week, only one director out of the eight that Van Hoogstraten (64) wanted to leave, was voted off the board.
For some RTG board members and shareholders who questioned Van Hoogstraten’s corporate politics, “reason prevailed over madness” at the group’s AGM last week. But Van Hoogstraten left the meeting with the typical ‘I-will-be-back look’ and his guns are still loaded and can shoot anytime.
But what is the story behind this dispute?
RTG, a former 100% government owned company, has gone through major changes in shareholding over the past decade, beginning with privatisation and listing on the Zimbabwe Stock Exchange in November 1999.
At that stage the major shareholders to emerge were Accor Afrique, a French hospitality group (35%); the Government of Zimbabwe through the Ministry of Mines, Environment and Tourism (30%); the National Investment Trust (10%); RTG Employee Share Ownership Scheme (5%); NSSA (18%) and the public (18%).
In 2002, in an effort to raise finance for the procurement of fuel from Libya, government sold 14% of its stake in RTG to the Libya Arab Investment Company (LAAICO), reducing its shareholding to 16%.
In 2004, the RTG found itself saddled with a heavy foreign currency debt and bleak prospects of short-term recovery due to the prevailing business environment.
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It went to the shareholders to raise funds through a rights issue. At this point two significant shareholders, Accor (35%) and LAAICO (14%) were not in a position to support the rights issue.
Government got NSSA to support the rights issue through a warehousing arrangement.
The rights issue brought in a new dominant shareholder, Van Hoogstraten, who since then has been in dispute with the RTG board demanding control of more than the 34% he managed to acquire of the RTG shareholding.
The dispute
As RTG searched in its shareholder register for shareholders who could provide it with a confirmation in support of its rights issue as part of the underwriting requirement by the bankers, the name Messina Investments cropped up.
The owner/director of Messina Investments was Van Hoogstraten, with extensive business interests in Zimbabwe.
He was approached to give his written support for the rights issue whereupon he insisted that he would not do free work for the banks. He said he would support the rights issue to the tune of $25 billion out of the $80 billion required.
However, he could only give his support through an underwriting agreement where he could at least earn a fee for his services.
When the $25 billion was still not enough for the RTG bankers (ZB Bank) to grant the global underwriting, Van Hoogstraten was persuaded to increase his underwriting to $40 billion.
The new agreement was then ceded to CBZ Bank who had by that time agreed to be co-underwriters.The rights issue circular then had two underwriters, namely CBZ Holdings (which was backed by the Messina Investments agreement) and ZB Bank. The two banks shared the underwriting in equal proportions.
At the close of the rights issue, the shares not taken up were split equally between CBZ Holdings for onward submission to Messina Investments or any other company under Van Hoogstraten, and Zimbank which was then taken up by Terra Partners through a Barclays Bank nominee vehicle.
This resulted in the following shareholdings structure – Messina and Other Companies (Banhams, Edwards Nominees) (34%), Terra Partners (a UK-based investment fund) (28%), NSSA (12%), Accor Afrique – South Africa (10%), Ministry of Mines, Environment and Tourism (4%), LAAICO (4%), RTG Employee Share Ownership Scheme (2%) and the public (6%).
According to documents to hand it was the split of the rights issue shares that angered Van Hoogstraten.
He alleged massive fraud by RTG directors and demanded that the board step down en masse.
Since the underwriting agreement entitled both parties to arbitration in the event of a dispute, the matter went for arbitration in 2006 before retired Justice McNally.
The arbitration ruled in favour of the RTG board.
In 2007 Van Hoogstraten attended the RTG AGM and demanded a poll vote of all the resolutions including the approval of accounts, appointment of directors and auditors.
Van Hoogstraten lost on this issue with 60% votes against his 34%.
In 2008, the RTG issued the AGM notice with a special resolution for approval of a share option scheme. Van Hoogstraten was against this motion and wrote to express his disapproval and threatened to sue the company if the scheme was implemented.
The shareholders present, voted unanimously in favour of the scheme. However, management has not implemented the scheme as it was hoped that Van Hoogstraten could be positively engaged on the issue.
In March Van Hoogstraten wrote to the company demanding a resolution for the removal of all RTG directors at the AGM which was held last week.
Banhams Investments’ reason for requiring the removal of the entire RTG board was that they had “little or no knowledge of business or in particular hospitality business.
He had proposed that Grace Muradzikwa be removed as non —executive chairperson of RTG. He is also proposing that seven directors be removed. The seven are Paschal Changunda (group finance director), Canaan Dube, Charmaine Rose Daniels, Godfrey Manhambara, Yarden Mariuma, Elliot Nyoni and Chipo Mtasa, the chief executive officer.
Going forward
Economic analysts said more drama was expected between Van Hoogstraten and the RTG board. Van Hoogstraten has enough shares to appoint about three directors, given that AFRE appointed two with half the number of shares he has.
Indications are that he will appoint those directors and one of them may be appointed chairman since there is no board chairman at the moment following the resignation of Grace Muradzikwa.
Muradzikwa who is rumored to be heading for Uganda to head NicozDiamond’s subsidiary, did not offer her self for re-election.
In the event that there are shares on offer, Van Hoogstraten is likely to buy them and become a major shareholder with over 50%. Some shareholders and investors will therefore be held hostage over something they have no control over.
Against such a background, it would be important for the directors and Van Hoogstraten to find a common goal to end the dispute.
BY PAUL NYAKAZEYA
