Zimbabwe: Govt, Van Hoogstraten Clash

Financial Gazette (Harare)

Munyaradzi Mugowo

24 June 2011

Government has drawn its sword against Nicholas van Hoogstr-aten, days before Rainbow Tourism Group (RTG)’s annual general meeting (AGM) scheduled for next week, over his inordinate attacks on the hospitality group and tendency to block special resolutions, which are understood to have paralysed the operations of the company.

For a second year, RTG has been forced to omit special resolutions from the AGM agenda, allegedly to forestall a showdown with the controversial British millionaire, who holds a 36 percent equity interest in the Zimbabwe Stock Exchange-quoted company.

Van Hoogstraten is up in arms against the RTG board, accusing the directors of prejudicing him of 323 million shares, about 17,5 percent of the company’s issued share capital, in an undersubscribed ZW$80 billion rights issue floated to recapitalise the company in 2005, in which one of his investment companies, Messina Investments Limited, participated as a subsidiary underwriter to CBZ Bank.

CBZ Bank and Syfrets Merchant Bank – then a division of Zimbank, now ZB Bank – acted as the lead underwriters in the offering, each assuming 50 percent of the liabilities.

At three AGMs, in 2007, 2009 and 2010, van Hoogstraten made a determined bid to oust the board and replace it with his appointees, on grounds incumbent directors were hostile to his interests, which he is still pursuing through litigation, harangues in the press and protracted boardroom and AGM wars.

Last month, the controversial millionaire directed the RTG board to advise shareholders he wished to appoint four directors to the board, including two of his sons, contesting four secondments made the same month by minority shareholder Econet Wireless Zimbabwe, which is currently making moves to gain control of the company through Africa First Renaissance (Afre) Corporation.

Tourism Minister Walter Mzembi, in an interview, said he was under instruction to quell the “hullabaloo around RTG” and untie the hospitality group from the fingers of van Hoogstraten, whom government now sees as a bigger threat to the underlying business of the company than Zimbabwe’s perceived country risk.

“The government is disturbed by the whole hullabaloo around RTG and there are instructions to stop the bickering and warn those playing to the gallery on a counter that is sensitive to issues of image, perception and reputation,” Mzembi said.

“Government cannot continue to watch its asset being undervalued by people who are supposed to be defending its interests. The parties must be reminded that they are haggling over a government asset.

“Just like King Solomon, I’m now worried more about the safety of the child than the ownership of the child. If they are genuine investors, authentic investors, why are they crying loud for the child to be split in the middle? I have responsibility as minister to protect the child from antagonists.”

The market expected government, which also directly holds a minority five percent in RTG, and a further 12 percent through NSSA, to tow the neutral line and buffer off the belligerents from another of the company’s periodic disparaging escapades that tend to flare up each time an AGM is due.

Van Hoogstraten is said to have failed a confidence test in Cabinet after attacking RTG and its board in the press last week and displaying what government sees as a vitriolic attitude at AGMs, suspecting the shareholder probably enjoys playing spoiler in special resolutions of the company.

“How can anyone ‘in government’ accuse me of being a ‘spoiler’ when it was my money, and my money alone, that rescued the Company?” van Hoogstraten asked in an interview with this paper.

It is understood government now wants the business mogul to explain his antagonistic behavior and why he voted against a special resolution to re-denominate the share capital of the company last year, which the board had tabled to fulfill statutory requirements set by the Registrar of Companies following the economy’s change-over to multiple currencies in 2009.

In terms of the company’s articles, board and management should seek shareholder approval for decisions designated as special resolutions, which require an affirmative vote from at least 75 percent of the shareholders.

Minority shareholders have also hauled van Hoogstraten over the coals for blocking special resolutions, paralysing RTG’s board and management, and pointed out that similar controversy built around him when he made moves to take over NMBZ Holdings in 2005.

The businessman, whose interests in the country also include agriculture and real estate, eventually divested from the banking group in 2007 at a consideration of about £1 million.

Econet Wireless, in particular, is alleged to be mobilising against the shareholder’s motion to appoint four directors at the AGM, namely Shingirai Chibanguza, Ian Haruperi and his two sons, Macmillan Rhett Hamilton and Alexander Setti Hamilton.

“As the major shareholder in the company with a 36 percent-plus holding, we are entitled (in a properly-run public company) to appoint three directors and the chairperson,” van Hoogstraten said.

“During the past few years the fraudsters at RTG, Afre Corporation and Econet Wireless have conspired together (for their own dishonest purposes) to deny us any board representation. There can be no legitimate reason for a shareholder to vote against our representation – the problem is that there are very few and only small legitimate shareholders.”

In spite of holding a minority interest in RTG, Econet Wireless has asked the AGM to confirm four candidates that it seconded to the board last month, including the chairperson, following the resignation of disgraced ex-chairperson Patterson Timba and his appointee, Charmaine Daniels.

Econet Wireless directly holds 13 percent of RTG and is poised to take over control of the regional hospitality group indirectly through Afre Corpor-ation, a 23-percent shareholder of RTG, should the ZSE-listed company successfully obtain legal approvals to take over Renaissance Financial Holdi-ngs Limited’s interest in the insurance entity.

The country’s largest telecoms operator and other shareholders feel it would be a violation of corporate governance principles for van Hoogstraten to push for board representation while his litigation case is still pending at the courts.

Van Hoogstraten is coming to the AGM with a dour face, challenging Econet Wireless to a blood and thunder fight, and seeking four board representations, on a pro rata basis.

The British-born investor also claims entitlement to 323 million shares, which would increase his shareholding to about 53,5 percent of RTG’s issued share capital, which were unsubscribed to in the hospitality grou-p’s disputed 2005 rights issue, but suffered a setback in 2006 when he lost a an arbitration at the High Court with costs.

Retired Justice James MacNally, in his arbitral award, ruled that Van Hoogs-traten’s Messina Investments Limited was a sub-underwriter to CBZ Bank, which undertook to support the offering at a maximum level of ZW$40 billion, half the total amount sought.

“Specifically, I find that Messina’s final status in relation to the rights issue was that of sub-underwriter to CBZ in respect of half the issues up to a maximum of ZW$40 billion,” read the arbitral award.

“Specifically, I find that because there were two lead underwriters, Syfrets and CBZ, each was liable for its ratable proportion of unsubscribed shares, namely 50 percent.”

Retired Justice MacNally further ruled that “there is no such thing as a ‘right’ accruing to an underwriter (much less a sub-underwriter) to acquire unsubscribed shares” and that “the underwriter has a right to his fee (in this case ZW$800 million) and a correlative duty to take up his share of unsubscribed shares.”

In March this year, van Hoogstraten made an interlocutory application at the High Court seeking an order for RTG to release documents that he considers critical in supporting an appeal that he has filed against MacNally’s arbitral award.

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