Maravi

(HERALD ZW) Firm challenges BP & Shell acquisitions

Firm challenges BP & Shell acquisitions
Saturday, 16 June 2012 19:44
Darlington Musarurwa
Business Editor

A local petroleum firm, Hughber Petroleum, has filed an application in the High Court seeking the nullification of the acquisition of BP & Shell assets by Masawara through its subsidiary FMI Energy Zimbabwe Limited (FMIE) and for it to be substituted as the purchaser, it has been learnt.

The company put in a competing bid for the former BP and Shell assets in 2010.
By last month, FMIE and two other respondents — the National Indigenisation and Economic Empowerment Board (Nieeb) and the Ministry of Youth Development, Indigenisation and Economic Empowerment — had been served with the papers.

However, BP Africa Limited and the Shell Petroleum Company Limited had not been served with the application by May 2.

It is understood that the ministry and the board are opposing the application.
Hughber Petroleum was formed in 1999 by Mr Hurbert Nyambuya, a former regional manager with Total Zimbabwe, and is a member of the Indigenous Petroleum Group of Zimbabwe.

On March 24 last year the AIM (Alternative Investment Market)-listed Masawara, through its wholly owned subsidiary FMI Energy Zimbabwe (Private) Limited, concluded the acquisition of BP Zimbabwe and Shell Zimbabwe for $32,7 million.

In a recent statement accompanying the company’s annual results, Masawara contended that the court application “is fundamentally flawed and has no merit, and that it will ultimately be dismissed by the court”.

“Hughber Petroleum (Private) Limited (“Hughber”), a company that put in a competing bid for the former BP and Shell assets in 2010, filed an application in the High Court of Zimbabwe in February 2012 seeking an order for, inter alia, the nullification of the acquisition of these assets by FMI Energy Zimbabwe (Private) Limited (“FMIE”) and for it to be substituted as the purchaser in place of FMIE.

“FMIE and two other respondents that have been served with papers, that is the National Indigenisation and Economic Empowerment Board and the Minister of Youth Development, Indigenisation and Economic Empowerment, are opposing the application.

“As at 3 May, 2012, the other respondents, BP Africa Limited and the Shell Petroleum Company Limited, had not yet been served with the application. The directors of the company believe that the court application is fundamentally flawed and has no merit, and that it will ultimately be dismissed by the court,” noted Masawara.

Though Nieeb is believed to be opposing the court application, earlier this year it accused Masawara in a 23-page report of misrepresenting its shareholder composition and also failure to carry out an employee shareholder scheme — a precondition for the consummation of the acquisition.

Ultimately, the board recommended the Minister of Youth Development, Indigenisation and Economic Empowerment, Mr Saviour Kasukuwere, to cancel the deal.

Said Nieeb: “We recommend revocation of the approval. The legal implication will be that the two parties will not be legally able to conclude their agreement. Both parties will revert to the status quo. The company will continue to operate under BP and Shell through local management until properly indigenised.”

The recent court application is the third hurdle faced by the Mr Shingi Mutasa-led group after the deal was also queried by Nieeb and the Competition and Tariff Commission early this year.

When the deal was conceived, three entities — Masawara Group, Masawara Mauritius Limited (MML) and FMI Zimbabwe — were central to the transaction.

FMI Zimbabwe is wholly owned by MML, which, in turn, is also owned by Masawara.

However, by the end of March last year, MML had formed a joint venture with a Mauritian-based firm, Alveir Management Limited, with the former holding 51 percent and the latter having 49 percent in the resultant entity — Masawara Energy Mauritius (MEM).

MEM, which wholly owns FMI Energy Zimbabwe, now controls BP and Shell assets.

Critics argue that MEM “has a different DNA” to FMI Energy Zimbabwe, which was the initial applicant; and, therefore, cannot be compelled to comply with the local empowerment legislation since it is based in Mauritius.

FMI Holdings, which controls the FMI group of companies, is an investment company incorporated in Zimbabwe under registration number 3181/90. Its shareholders include: Listerton Investments, owned by the Mr Shingi Mutasa Family Trust, S. Mutasa and L. Mutasa; Invesco, which is considered an inactive shareholder with a 25,5 percent; and private investors based in the UK.

Initially fears raised by Nieeb were that FMI Holdings shareholding in the Masawara group had been diluted to 26 percent, which is below the approved threshold, and there was a possibility of it to be whittled further since the company had borrowed money from an “unknown bank” on October 31 2011 and offered $50 million FMI Holdings shares as collateral.

Masawara, formed as a Zimbabwe-focused business, last year acquired 50 percent in telecommunications business Telerix Communications in January and a 15 percent stake in iWay Africa in October.

In addition, the company also shored up its stake in TA Holdings from 30 percent to 37,73 percent.

Meanwhile, in the annual report, Masawara reported that for the year ended December 31 2011 it realised a $6,7 million profit from a loss of $3,3 million buoyed by a gain on the bargain purchase of BP & Shell assets of $9,2 million.

TA holdings also performed well after recording a net profit of $6,3 million, with the group’s share of profit being $1,6 million.

iWay Africa and Telerix, however, underperformed and will be restructured during the course of the year.

In particular, Telerix incurred a loss of $3,2 million for the period due to costs related to the development and testing of the WiMAX network that is expected to be launched before the end of the year.

Joina City showed signs of growth with revenues jumping to $1,2 million in the review period from $538 000 in the same period a year ago. At the end of the period, the retail section was 90 percent occupied, while the office tower was 29 percent occupied.

As part of a comprehensive restructure of the group, more than $800 000 has since been used in the retrenchment at TA Holdings and at the Zimbabwe hotels head office.

Already, a decision has been made to divest from PG Industries and from the Zimbabwe Fertiliser Company.

Labels: BP, OIL, ROYAL DUTCH SHELL PLC

posted by MrK @ 4:41 PM