This is one of the Public Investment Corporation’s more controversial deals – it invested R4.3bn in Ayo in 2017. From Moneyweb.
Tech investment group Ayo Technology Solutions received 99% shareholder support on Wednesday for a settlement agreement that will see it repurchase 17.2 million shares and hand over R619 million to the Public Investment Corporation (PIC).
This is well short of the R4.3 billion invested by the PIC, then under the stewardship of former CEO Dan Matjila, for a 29% share in Ayo prior to its listing on the JSE in 2017.
Ayo, part of Iqbal Survé’s Sekunjalo group, was hauled to court by the PIC in 2019 seeking an order to undo the share subscription agreement between Ayo and the PIC and have it set aside on the grounds that the investment case was based on misrepresentations.
The PIC further asked the court to order Ayo to repay the R4.3 billion it had invested, with interest at 10.25% a year.
A settlement was reached more than a year ago and then made an order of court. This what Ayo shareholders were asked to support on Wednesday.
Controversial
The controversial PIC investment was widely criticised in the press and by the PIC itself, and was the subject of some scathing comments from the Mpati Commission, which found the PIC flouted internal governance procedures in approving the investment.
“From the outset it appears that the PIC’s interactions with and investments in the Sekunjalo Group were questionable,” concluded the Mpati Report, while the Government Employees Pension Fund (GEPF), of which the PIC is a manager, did not support the deal in a sector that “had a bleak future”.
The PIC investment deal was struck at R4.65 a share back in 2017. This week Ayo shares traded at 90c.
Full-year results for the year to August 2023 show revenue of R2.3 billion and an after-tax loss of R619.8 million.
The half-year results to February 2024 show an after-tax loss of R113 million.
More than 99% of Ayo shareholders this week voted in favour of the Ayo-PIC settlement agreement that had been made an order of court in March 2023. In a statement on Wednesday, Ayo says the settlement leaves the group with a clear runway to ramp up its business.
The settlement means the PIC would retain 25% of Ayo, now worth a fraction of what it was in 2017.
The GEPF has an option to sell a further 5% of its Ayo shares at the higher of R20 per Ayo share and the prevailing 90-day volume weighted average price. Ayo will have to perform some miracles to get the price to these kinds of levels.
The settlement also grants the GEPF minority protection rights should its shareholding drop below 25%.
The PIC is Africa’s largest asset manager with R2.6 trillion in assets under management, and is responsible for the management of some 80% of the GEPF portfolio, which has 1.2 million active members and more than 450 000 pensioners and beneficiaries.
Ayo ‘back on track’
“Ayo, who has weathered many storms since listing in December 2017, is now firmly back on track, as was indicated in its recent half year results, which showed the positives of the various cost containment measures and new strategies the group has implemented over the past 12 months or so, including the recent appointment of Advocate Dr NA Ramatlhodi as chairman of the board,” says the company in a statement.
In a statement issued in April 2023 after the settlement was made an order of court, the PIC board berated its management for failing to inform it timeously of its intention to settle “in line with PIC governance processes”.
“Whilst deeply concerned about management’s handling of the governance processes, the board believes the Ayo settlement, which is an order of the court, is justified as a good commercial decision,” said the PIC.
“This settlement seeks to recover money from a questionable investment, salvaging value for its client and its beneficiaries, whilst ensuring that Ayo Technologies remains a going concern.”