Wednesday, June 3, 2020

A profitable leap to hidden figures

BY BONNIE MODIAKGOTLA

Botswana’s most successful company, Wilderness Holdings, is expecting a bump in profits ÔÇô the last of the company’s impressive financials that will no longer be public information once the ecotourism company exits the Botswana Stock Exchange (BSE) later this year.

On Tuesday, Wilderness notified shareholders that the group’s profit before tax for the year ended 28 February 2019 is likely to be 35 ÔÇô 45 percent or a gain of between P45 ÔÇô P52 million above the P115 million achieved in the corresponding period last year.

The ecotourism company is having its best commercial years, delivering stellar profits year on year, while the stock price soared on the BSE. The company formed in 1983 has seen its revenue increase every year in the last five years, with profits bolstered by the strong dollar relative to African currencies. The company’s stock has also proved to be a good investment ÔÇô Wilderness share price was up 19 percent last year, making it the best performing stock for the period, and outdoing local benchmark indexes.

However, in a shocking move, the company announced in March this year that African Wildlife Holdings partnership plans to acquire shares in Wilderness and delist the successful tourism company. The price consideration has been put at P6.25 per share, a 45 percent premium to the previous month’s average trading price that is expected to entice shareholders to let go of the stock. The company expects to terminate its listing on August 2019.

Wilderness’s delisting plans comes shortly after the ecotourism company’s shares were scooped by two private equity firms in July 2018. The Rise Fund – managed by TPG Growth – acquired 34 percent of the shares in issue, while African Wildlife Holdings – an associate of FS investors – bought 24 percent of the issued. TPG Growth and FS Investors are closely related private equity managers, with both companies sharing same directors.

It is not clear whether the company is delisting due to the dominance of private equity managers on the board of the company, or it has been a plan long in the making. The clearest indication that Wilderness was mooting a stock exchange exit could have come as early as 2016, in an exchange that has now become part of the multi-million case between Botswana Public Officers Pension Fund (BPOPF) and Capital Management Botswana (CMB).

BPOPF and CMB crossed paths in 2014 following the pension fund’s P800 million private equity programme targeted towards unlisted local investment opportunities. CMB won the bid to partner with BPOPF, resulting in Botswana Opportunities Partnership (BOP), an investment company in which CMB was the general partner while BPOPF was the limited partner and sole investor.

From the P800 million private equity purse, only P500 million was released as the first tranche of the programme. Through BOP, CMB as the fund manager, drew down P450 million to be used on investments, leaving only P50 million in the books of BPOPF. The business relationship started showing signs of cracking in 2017 when BPOPF became suspicious of the fund manager after uncovering breaches which contravened the partnership agreement.

Chiefly among the concerns were that CMB invested in a listed company contrary to its mandate to invest in privately held companies. This was after it was uncovered that CMB, through BOP, has bought about 27.9 million shares of issued Wilderness shares – representing a stake of 12 percent valued at P150 million at the time in 2016.

The BPOPF has since instigated legal proceedings to recover the P450 million from CMB following allegations of misappropriation of funds, overcharging of fees, negligence and fraud in the fund. CMB has maintained its innocence, and has said it can account for the investments it made. CMB has defended its decision to invest in a listed company like Wilderness, explaining that CMB had on good authority that Wilderness will be delisting soon, thus the CMB stake in Wilderness will comply with the BOP agreement to invest in unlisted securities.

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