Econet Inspired to Block Bid

THE controversy surrounding Econet Wireless’ EGM last Friday is the culmination of years of bitter corporate battle between two of the Zimbabwe Stock Exchange’s largest investors.

Shareholders of Econet last Friday authorised a US$93,9 million funding package from South African-based Econet Wireless Group (EWG), Econet Wireless Holdings’ (EWH) largest shareholder.

The traditionally short EGM turned into a marathon that lasted until 7pm after Old Mutual and a group of foreign shareholders demanded a secret poll based on the number of shares held by each member present.

The shareholders also raised conflict of interest issues relating to chairman Tawanda Nyambirai’s role in the transaction. Nyambirai will step down at the next AGM.

With EWG and TSMI, who between them have more than 50%, unable to vote because of conflict of interest provisions, Old Mutual had hoped that its own shareholding of about 12%, and that of the other allied shareholders, would be enough to vote down the deal.

After the poll had been conducted, the vote in favour of the transaction was still much greater than that mustered by Old Mutual and its supporters.

Controversy erupted after Nyambirai said Old Mutual was not eligible to vote, because it had emerged that some of the institutions and investors they claimed to represent as an asset manager had not given them authority to vote on their behalf.

Old Mutual and Econet have been feuding for several years now. Last year, their feud broke out into an ugly fight when Old Mutual tried in vain to reverse the merger of Kingdom and Meikles.

The two giants are also known to be at opposing ends of the battle for KMAL, with Old Mutual backing John Moxon and his associates. Econet is the single largest shareholder in KMAL.

“It was inevitable such a fight would erupt at the Econet EGM. This is a battle between old money and new money,” the head of a leading fund management firm said this week.

Market analysts trace the long-running battle between these two corporate giants to Econet’s decision to acquire, together with Renaissance, a controlling stake in FML, Old Mutual’s largest competitor in the life business.

Reflecting the bitterness between the two, an Econet executive told business digest yesterday: “We sold our shares in their company when we bought FML. They should do the same if they cannot deal with us in a professional manner,” the executive said.

When shareholders and analysts arrived at the EGM they did not receive the results of the EGM. It was only after the request of a poll by some shareholders following a question and answer session that the complexion of the EGM changed and the role of the auditors, Delloite & Touche, became relevant as scrutineers to the voting process.

Mainly because a poll is a democratic process provided for in the Companies Act, the decision to hold the voting process by poll was passed by shareholders at the meeting.

At the time the poll was called for, the auditors made it clear that because they had not been forewarned that a poll would be conducted, they needed time to prepare the serialised ballot papers for voting by shareholders present at the EGM and time to verify names of shareholders and shareholding held by shareholders as per the register from First Transfer Secretaries.

For those shareholders who were not present, their proxy forms previously submitted to the company secretary prior to the meeting would stand in favour of the nominated proxies and still participate in the voting process through their nominated proxies.

“One would have appreciated the complexity of the exercise with the knowledge that Econet has just over 7 000 shareholders of which a number of them sent in proxies with their votes prior to the meeting and did not attend in person,” said one analyst.

The company secretary at one point in the meeting informed shareholders that just over 200 proxies which comprised about 74,9% of the eligible votes had been received and the majority were in favour of the chairman.

Throughout the voting process and the verification exercise on the day of the EGM, the auditors are said to have done their work confined to a room where no unauthorised person was allowed to enter.

“Perhaps because of the complexity of the exercise and the need to exercise caution on accuracy, the auditors took several hours and it was subsequently decided in the meeting to adjourn to 1730 hours when the auditors had anticipated to have completed the collation of the voting,” an industry told businessdigest.           

Shareholders reconvened at 1730 hours on Friday for the results of the EGM. Unfortunately the auditors had not completed the exercise and the process dragged well beyond the anticipated time.

It was only after 1900 hours that the auditors came through with results of the voting process which they handed over to the chairman to announce to the shareholders.

The chairman announced the result of each resolution which had been carried by a margin in excess of 70% in favour of the resolutions.

After the chairman had declared the resolutions carried by a majority vote, Old Mutual Asset Managers and three other external shareholders who had initially called for the poll interjected the chairman declared that there were voting irregularities that warranted a cancellation of the meeting and nullification of the results.

The purported irregularities claimed by the dissenting shareholders centred on the following two issues: Old Mutual Asset Managers shares had been excluded in the results announced by the chairman; and the dissenting shareholders alleged that the auditors had inflated the shares eligible to vote. Dissenting shareholders alleged that only 49 million shares were eligible to vote and as a result the resolutions according to their calculations should have been rejected.

It has since been established from the announcement made by Econet that Old Mutual Asset Managers submitted a proxy and poll form which claimed to have 17 420 408 Econet Wireless Holdings Ltd shares.
The register however shows that Old Mutual Asset Managers only has 1 516 shares and could only validly claim votes for shares reflected in the register in their name.

 “It is mind-boggling that the oldest asset manager in the country could just think they could assume to have rights over shares that do not belong to them and vote as they wish over those shares without seeking the relevant proxies that should have been presented at the EGM to show that they had been properly authorised to exercise discretionary voting rights over the shares,” an analyst said.

This raised questions if proper procedures were done by Old Mutual Asset Managers of consulting their clients. Despite the alleged irregularity on the part of Old Mutual Asset Managers, some market watchers are said to have “swept this indiscretion under the carpet”.

“The allegation of the auditors having inflated the eligible shares to vote is a serious allegation that should be substantiated,” an analyst said.

According to Old Mutual Asset Managers, the number of shares eligible to vote were based on the attendance register that had a number of shares and the name of attending shareholders which shareholders filled in as they attended the EGM on Friday.

The EGM was held to seek approval for network stabilization and expansion. “If dissenting shareholders had something to the contrary they should have suggested another mechanism to raise money for the company to expand the network,” said an analyst.

BY PAUL NYAKAZEYA

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