HAS Nicholas Van Hoogstraten given up on Rainbow Tourism Group (RTG)?
It appears the RTG majority shareholder has re-organised his shareholding in the group, packaging it ready for disposal.
Van Hoogstraten held 463 million shares in RTG, representing 34% of the total issued share capital of the company through Banhams Investments, Messina Investments and Willoughby’s Finance.
He has re-registered the shares from Messina to Les Nominees – now with 18,23% and EFE Security Nominees 10,91%.
This is the route that Van Hoogstraten – the single largest investor of the stock exchange – often takes when he is about dispose his shares in companies.
Some analysts contend that Van Hoogstraten has restructured his investments in such a way that he can disposeÂ of the actual vehicles owning the shares and not the actual shares themselves.
That way, he would be selling the company and not the shares and thus enjoys the full value of the proceeds of the sale.
The local bourse has a higher transaction cost at 4,5% on selling rather compared to a regional average of about 2%.
Using the current price of US$2,50, he would get US$11,6 million less costs of US$520,875.
“The re-branding of his investments is a much smarter way of doing it,” an analyst said yesterday.
But the question is why would he be selling after fighting so hard to control the company? He has expended so much energy and resources on the company.
Investors are curious as to why he would want to sell, particularly after a large parcel, which is rumoured to have been under the control of Herbert Nkala and which amounted to 7,34%, had changed hands.
Speculation was that it had been snapped up by Econet boss Strive Masiyiwa and Afre executive chairman Patterson Timba alliance.
“Has Nick made a deal with the axis, or he is not willing to take on the Strive and Patterson alliance head on? Is Nick saying he cannot go into bed with Timba, as a co-investor? What does this say about Patterson and Strive?” questioned an analyst this week.
Sources said Van Hoogstraten was monitoring the company’s shares and was prepared to sell when it surpasses US$4. RTG’s share is trading between US$2 and US$2,80.
Following the latest changes on RTG’s shareholding, the top 10 shareholders by account names are Les Nominees 18,23%, National Social Securities Authority (NSSA) 11,92%, EFE Securities 10,91%, Krumlov Estate 0,72% and Kingdom Nominees 7,32%.
Afre however holds about 13,83% in RTG when shares owned by companies linked to the group are combined.
Insiders said Van Hoogstraten’s decision to sell his shares emanates from his failure to control the group the way he wanted due to differences with other board members.
In a letter to RTG dated March 11Â 2009, he proposed that Grace Muradzikwa be removed as non-executive chairperson of RTG. He also proposed that seven directors be removed for “alleged incompetence”. 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.
Muradzikwa has since been replaced by Timba after she did not offer herself for re-election.
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, RTG found itself saddled with a heavy foreign currency debt and bleak prospects of short-term recovery due to the prevailing business environment.
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.
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 US$25 billion out of the US$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 US$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.