While SA has been locked down due to Covid-19, an intense legal battle has been raging over the ousting of businessman Mashudu Ramano from African Legend Investment. This, after he became an obstacle to a $1bn deal in which commodity multinational Glencore would buy energy company Chevron SA’s assets.
The court case was launched by Ramano and eight shareholders in African Legend against 13 respondents, including directors of African Legend and its subsidiary Off The Shelf (OTS) Investments Fifty Six, Glencore and Astron Energy, as well as the Astron Energy employee trust.
In his founding affidavit Ramano, who established African Legend more than 20 years ago, says he was summarily removed as executive chair last year when the directors in question aligned themselves with Glencore SA.
It all goes back to the $1bn deal for Chevron SA’s assets, including a crude oil refinery, a lubricants plant, pipeline infrastructure and Caltex service stations throughout SA. Chevron Botswana’s assets were also part of the disposal.
As the BEE partner to Chevron SA, with a 23% stake in the business, OTS had first right of refusal when Chevron sought to sell off the local assets to China-based petrochemicals company Sinopec in March 2017.
Both OTS and African Legend were chaired by Ramano at the time.
As Ramano explains, OTS was keen to exercise its right of refusal, and he had identified Glencore as a possible financial and technical partner in this aim.
In terms of their subsequent agreement, Glencore would give OTS the funds to buy the assets — plus a $20m success fee. Once OTS took ownership from Chevron, it would transfer the assets to Glencore.
Ultimately, Glencore did get the assets from OTS — but not before Ramano had been kicked to the curb.
In his affidavit, Ramano says his negotiations with Glencore resulted in the commodity giant committing to a number of other transactions that would benefit African Legend, OTS and their shareholders.
These "remaining transactions" were detailed in a framework agreement drawn up in October 2017. One allowed OTS, within 12 months of transferring the Chevron assets to Glencore, to acquire a stake in Chevron Botswana and increase its shareholding in Chevron SA, since renamed Astron Energy.
Another transaction would allow Glencore and OTS to jointly supply crude to Astron Energy, with profits accruing directly to shareholders. A fixed dividend policy would ensure OTS could service its debt to Glencore through proceeds from Astron.
In terms of the agreement, OTS’s acquisition of Chevron SA’s assets was "Transaction 1". "Transaction 2" was the on-selling of those assets to Glencore.
Transaction 1 closed on September 27 2018 — but before that could happen, Ramano says he demanded that Glencore give OTS "a concomitant right, at any time before Transaction 2 closed, to acquire its share in Chevron SA and Chevron Botswana".
Glencore obliged, and in a letter — referred to as the written undertaking — said it would consider a commercially attractive offer for OTS’s acquisition of the shares any time before Transaction 2 closed. It further said the letter was "legally enforceable", and would prevail in the event of a conflict between the provisions of any agreement and the provisions of the letter.
But in November 2018, Glencore accused OTS of breaching its contractual obligations. Ramano believes there was "no factual basis or justification" for the allegation, and he in turn became concerned that Glencore was negotiating in bad faith.
There were several red flags, he says. For one, Glencore had not provided a draft agreement for the crude oil joint venture, despite promising to do so the previous November. It also indicated it did not consider the written undertaking in the letter to be binding.
Ramano says he was worried that Glencore’s commitment to transformation and to give Astron increased autonomy and onshore decision-making power was insincere.
At this point, the directors of African Legend and OTS who are respondents in the court action became involved.
Abdoolrawoof Ahmed, African Legend’s company secretary and one of the respondent directors, in his affidavit casts Ramano as a hostile figure whose actions put OTS in jeopardy.
By late 2018, he says the respondent directors had become aware of "serious relationship issues between Ramano and Glencore"; by early 2019 the relationship had broken down.
Though not present when Glencore’s written undertaking was penned, Ahmed says it came about after Ramano locked himself in a toilet for over an hour, refusing to attend the closing meeting for Transaction 1 until Glencore obliged.
Soon after, Ahmed says, Ramano expressed his distrust of Glencore and suggested a new partner be found.
Following the closure of Transaction 1, Ahmed says Ramano gave media interviews and public presentations that miscast the agreement by saying OTS had the option to retain the shares in Chevron if it repaid Glencore. He also says Ramano claimed in a board meeting that OTS could buy Glencore out, and said he had identified potential investors.
All of the directors, bar Ramano, were extremely concerned about the developing situation and that Ramano was leading OTS down a path to disaster
— Abdoolrawoof Ahmede
In reality, Ahmed says, Glencore had told Ramano that it would consider a commercially attractive offer, but that OTS did not have an option to purchase. The company later made it clear that Ramano’s behaviour was prejudicing the transaction.
While Glencore was pushing for Transaction 2 to close, Ahmed said he was instructed by Ramano to slow the regulatory process.
In January 2019, the directors received legal letters over a breach in contractual obligations, and claims of the associated damages Glencore was suffering.
Though Ramano viewed this as nonsense, "all of the directors, bar Ramano, were extremely concerned about the developing situation and that Ramano was leading OTS down a path to disaster", according to Ahmed.
This, however, is not the nub of the legal challenge. That takes aim at the directors for what apparently followed — in Ramano’s view, numerous contraventions of the Companies Act.
According to Ramano’s account, he had no intention of reneging on the contract. However, he says the directors, in accepting "unfounded" claims of a breach of obligations, and in removing him as chair of African Legend and OTS in February 2019, failed to perform their functions.
In siding with Glencore and removing him as chair, Ramano says the directors "sterilised" his efforts to ensure that the remaining transactions progressed.
A letter from one of the directors to inform Glencore of Ramano’s ousting "clearly indicates that my removal as chairman … had been discussed and co-ordinated with Glencore", he says.
In April that year, subsequent to Ramano’s ousting as chair, a special resolution allowed for Transaction 2 to close.
The respondent directors then apparently devised a way to water down Ramano’s voting rights in order to also remove him as director of African Legend at the company’s AGM in February this year.
Though Ramano held an economic interest of 8.6% of African Legend, the company’s historical structure afforded him more than 40% of its voting rights.
In Ramano’s telling, the directors avoided and subverted the holding of a general meeting, despite demands from certain shareholders to do so, because they knew they would be removed.
But just ahead of the AGM, Ramano says they "held secretive negotiations and devised a scheme to which Glencore SA, Astron SA and the Astron trust were complicit, for the Astron trust to subscribe for shares of African Legend".
The Astron employees trust acquired R24m in shares in a deal that Ramano claims had no commercial basis, save to manipulate the share register and dilute the voting rights of existing shareholders — including the co-applicants in this case — by 17.48%. It also resulted in Ramano’s removal.
Were it not for this, it is the respondent directors who would have been removed, he says.
While the directors said the share issue was to raise funds for a greater stake in Astron SA and Astron Botswana, Ramano counters that this was a "blatant lie", as such a deal was not so advanced.
On Ahmed’s account, the directors had no choice but to intervene in the matter. Though Ramano believed the written undertaking was legally enforceable, the respondent directors did not. In canvassing views of shareholders, Ahmed says there was overwhelming support for the directors to intervene to ensure that Transaction 2 was concluded.
He says Ramano had known since May 2019 that there was a plan to raise capital through a share issue — a claim Ramano denies.
Ahmed further notes there is nothing objectionable in concluding the share issue ahead of the AGM.
He says it had also become clear that no-one would invest in African Legend if Ramano continued to hold disproportionate voting rights, given his prior behaviour.
Ramano says he was removed as executive chair when some directors aligned themselves with Glencore
— What it means:
As indicated in the court papers, the Astron trust has justified the transaction as providing beneficiaries with exposure to the commercial vehicle of Astron, as well as some diversification through the African Legend shareholding.
Ahmed says that in a best and final offer advanced by Glencore in March this year, it would not extend the option period for OTS to increase its shareholding in Astron SA but would provide vendor financing — though the share issue capital must be put down as a deposit. It would not assist with funding for stakes in the Botswana business.
Ahmed says OTS declined to exercise options before they expired for reasons related to the pandemic and its impact on the global energy sector and thus the value of the shares.
Glencore has, however, since indicated it would still be prepared to entertain a similar transaction and OTS is engaging with its financial advisers, Ahmed says.
"If the funds are not utilised to acquire additional shares in Astron or shares in Astron Botswana, they will still be used for the benefit of the company."
Ahmed says negotiations with Glencore on the remaining aspects of the framework agreement are ongoing.
But Ramano is incensed. He argues that the respondent directors have "simply accept[ed] the say-so of Glencore, and are prepared to accede to its demands and proposals rather than taking the requisite steps to investigate and consider the commerciality and fairness of such proposals and negotiating the terms of the remaining transactions, which are of significant importance to OTS, African Legend and its shareholders".
In a statement, Glencore says Ramano’s legal papers contain "a host of baseless and inaccurate allegations and submissions relating to Glencore. Many of these allegations have, however, already been dealt with in previous court proceedings (determined in Glencore’s favour) and, arising from the fact that no relief is sought against Glencore in the application, Glencore is not currently opposing it."
Meanwhile, African Legend, OTS and the respondent directors have filed a counterapplication wherein, among other relief, they ask that Ramano be either declared delinquent or placed under probation.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.