This story is part of a special report chronicling events that led to the dismissal of Andrew Okai as the CEO of Letshego Holdings. In case you missed it:
Board alleges obstruction in its work
On 26 November 2021, court documents seen by The Business Weekly & Review state that the Chairman of Letshego, Enos Banda, received a request for a discussion from Robert Dommisse, CEO, Life Insurance at Sanlam, South Africa’s premier financial services company.
Domisse, according to documents, is Gerrit van Heerde’s line manager at Sanlam. Heerde is Group CEO of Sanlam Emerging Markets (SEM), a company that owns a controlling stake in Botswana’s most diversified financial services company, Botswana Insurance Holdings Limited (BIHL). The BIHL Group also has a significant stake in Letshego. So, with BIHL controlled by Sanlam, it is safe to say that Sanlam also has indirect shareholding in Letshego.
That being said, Letshego chairman Banda, according to the documents, acceded to Dommisse’ request by a call on the same day. In this call, it is stated that Dommisse requested a meeting between Banda and Bayport Management Limited, a Mauritius-based company, to discuss an Expression of Interest (EOI) relating to the potential partial offer for the shares of Letshego by Bayport. It appears Bayport had conducted a series of meaningful engagements with Sanlam, which is the controlling shareholder of BIHL Group and had in principle received support from BIHL regarding the proposed acquisition of BIHL’s 28 percent shares in Letshego in exchange for issuance of new Bayport shares to BIHL. In addition to the BIHL transaction, Bayport would therefore, according to available evidence, look to acquire a minimum shareholding of approximately 22.1 percent from other remaining Letshego shareholders through a partial offer to achieve its desired minimum of 50.1 percent shareholding in Letshego.
Further, it emerges that Bayport and BIHL had engaged with another key shareholder, the Botswana Public Officers Pensions Fund (BPOPF) and its board of directors in relation to the merits and considerations of the proposed transaction, the BIHL transaction and the partial offer. A partial offer is an offer to shareholders to buy a specified number of (but not all) shares which carry voting rights of a company not already held by the offeror and its concert parties. Banda, the Letshego chairman, is said to have agreed to the meeting with Bayport, which was to be preceded by a letter. The letter was subsequently received on 27 November 2021.
On 28 November 2021, it emerges that Banda had a meeting with the CEO of Bayport Chris Newson and a Senior Advisor from Investec Bank. The purpose of the meeting, according to documents, was primarily to discuss the contents of the letter as well as Bayport’s intentions as contained in the letter. The key request from Bayport was for them to conduct due diligence on Letshego as a basis for them making a partial offer for the 22.1 percent to the remaining shareholders. Documents show that Letshego chairman Banda highlighted that it was Bayport’s intention and hope that the transaction would be done and on friendly terms, therefore they wanted to get the support of the Board and management of Letshego.
Given the nature of the letter, documents reveal, it appears that because of the nature of the institution submitting the EOI, the support that Bayport had with Investec, which is a credible financial services advisor and an investment bank, the Chairman of Letshego saw it appropriate to present this to the independent board of the company. It was noted that the letter had not been disclosed to the Sanlam/BIHL representatives on the Letshego Board as well as the Development Partners International (DPI) representatives. DPI is a private equity firm, and a shareholder in Letshego. To manage the discussion, the Chairman proposed consideration of implications of the letter on Project Lion (a sale process conducted by DPI) which was currently ongoing, the most appropriate way to respond to the letter, as well as the communication with the non-independent directors and the implications of the proposed transactions, if successful, on the Board and management of Letshego.
However, it appears that there were speculations on how the transaction would be perceived by DPI. But Ronald Hoekman, an independent director, was of the view that there might be an issue with the DPI transaction because bidders from DPI were of the understanding that they were buying the DPI shares into Letshego with the knowledge of existing shareholders. Should the Bayport transaction materialise, documents state, there would be a material change of Letshego shareholding, which means they would have bought a minority stake in a company that was being taken over by a third party.
Further, it appears another independent director, Stephen Price, was of the view that the independent board had no obligation to the DPI in this regard and indeed could not allow disclosure to the Project Lion bidders. It also emerges that the then CEO, Andrew Okai, proposed that legal advice be sought on the matter as it might be difficult for the board to facilitate both DPI and Bayport transactions separately. He is further said to have stressed that it was important for the board to have a clear line of sight into what the implications and impact would be on the board.
According to documents, another independent director, Rose Mwaura, was in support of Okai seeking legal advice as she was concerned about the legal implications of the board approving two due diligence processes to be conducted in parallel. Philip Odera, another independent director, disclosed that he had worked with Chris Newson, CEO of Bayport, in the past and given his understanding of the individual, there was a need for careful consideration on this transaction. According to documents, Odera stated that Newson was relentless when pursuing a specific objective.
Independent director Dr Gloria Somolekae, on the other hand, is said to have expressed concern about the proposed purchase price that Bayport would offer to the remaining shareholders, given the increase in the share price over the months as well as some of the points that were raised in the letter, like Letshego’s performance versus Bayport’s performance being better at the time. According to Somolekae, this showed the strength of Letshego performance while the EOI stipulates that there would be value in bringing Bayport management onboard to strengthen the leadership. However, Banda, the Letshego chairman, was of the view that there was no need to compare performances but rather to focus on the mandate of the board.
Read more: Alleged information blackout