The Independent Board of Imara has recommended that Imara Shareholders reject the offer by FWA Financial Limited to acquire the entire issued ordinary share capital of the company that it does not already own.
The recommendation comes a month after FWA offered shareholders a cash offer consideration of P2.10 per offer share, which is 19% lower than the current share price. FWA is a financial holding company registered in Mauritius, and the company is the single largest shareholder in Imara with a 28.97% stake. In its offer, FWA has proposed to buy the remaining 71% of Imara shares which are currently not held by them. Furthermore, the offer was not a combined offer as it was made directly to shareholders, which means shareholders do not need approval to sell to FWA hence making a hostile takeover possible.
When making the offer, FWA reasoned that the offer price of P2.10 per share is attractive to shareholders, providing a liquidity event as well as representing a fair value proposition. The Mauritius based company is hoping to leverage their offer on the absence of liquidity for Imara shares on the Venture Capital Board of the BSE and meet shareholders desire for a return of the cash proceeds associated with the sale in 2015 of Imara SP Reid Proprietary Limited either through share buyback or declaration of special dividends.
FWA as the main shareholder has taken the role of the activist investor as the company appears to question certain decisions taken by Imara, furthermore the offer to buy the whole of Imara seems to stem from the concerns regarding the future operations of Imara.
FWA appears to be disappointed that the share buyback programme approved by shareholders last year October to buy back 15 million shares has not been implemented, denying shareholders capital gains accrued and also the chance to offload the hard to sell stock. Moreover, FWA said when making the offer that the potential for Imara to keep its shareholders happy through a special dividend is unlikely as the company simply doesn’t have sufficient cash reserves to finance an attractive special dividend.
FWA argues that Imara’s distributable reserves amounting to P39.2 million equates to a maximum potential dividend of P0.66 per share, approximately 31.4% of the FWA offer price. FWA’s offer to take over the whole of Imara is motivated appears to be driven by the desire to save the company from collapse as they highlighted that Imara finds itself in a tough spot.
FWA says Imara has experienced difficult trading conditions in the sub-Saharan African markets in which it is active. African economies have suffered a sharp decline in the past 18 months, driven by weak commodity prices which led to declines in currencies versus the US Dollar, difficult economic conditions, currency controls, reduced liquidity, lower share prices and reduced equity trading volumes.
Indicative of the challenges experienced by Imara is the 50% drop in the value of the flagship Imara African Opportunities Fund in US Dollar terms in the period from 30 April 2015 to 30 September 2016 as a result of the decline in African equity values and redemptions.
In the five years to 30 April 2016, Imara generated profits Attributable to Owners of the Parent in two out of the five years. Cumulative Losses Attributable to Owners of the Parent totalled BWP24.6 million in the five years to 30 April 2016. In the year to 30 April 2016 IHL reported a pre-tax loss of BWP13.38 million from continuing operations before the profit on disposal of Imara SP Reid Proprietary Limited, exchange rate gains and goodwill impairments.
FWA has also noted that Imara has high central costs for a company of its size, adding that the high central costs reflect the fixed costs associated with its listing on the Venture Capital Board of the BSE as well as fixed costs associated with the complexity of its business model.
DETERMINING THE OFFER PRICE
“In determining the Offer price, FWA has taken into account IHL’s track record, the value of IHL’s balance sheet at 30 April 2016 and IHL’s growth prospects. FWA therefore considers that the all-cash nature of the Offer allows Shareholders to realise their entire investment at a fair value given the uncertainties facing African economies and IHL at this time,” the acquiring company said.
FWA has also revealed that should it manage to buy the required shares, it intends to make an application for a delisting of Shares on the Venture Capital Board of the BSE. The reasons for de-listing include the lack of liquidity in the Botswana market for small-cap shares and thus the ability to set proper market prices becomes compromised; the limited liquidity to raise capital as a small-cap stock; management having to spend a significant amount of time to focus on investor relations and compliance with the BSE Listing Requirements and ongoing fixed costs associated with BSE Listing Requirements compliance and regulatory oversight.
While it appeared that FWA had made a convincing case for the takeover, the independent board has not only rejected the offer price but also quashed some of FWA’s claims regarding the operations of Imara. The board of directors of Imara were obligated to form the Independent Board for the purpose of considering the terms and conditions of the Offer. The Independent Board, in accordance with its obligations in the Takeover Regulations, appointed KPMG as an Independent Expert to provide it with a fair and reasonable opinion regarding the fairness and reasonable of the Offer Consideration. Following receipt of that fair and reasonable opinion, the Independent Board is required to communicate the contents thereof to Shareholders, together with the Independent Board’s opinion on whether or not the Shareholders should accept the Offer.
IMARA INDEPENDENT BOARD FIGHTS BACK
“The Independent Board, taking into account the opinion of the Independent Expert that the terms and conditions of the Offer are not fair and not reasonable, has considered the Offer and is of the opinion that the Offer undervalues the Company and, on that basis, recommends that Imara Shareholders reject the Offer.”
The Independent Board considers the Offer to be an opportunistic move to take advantage of the current short-term adverse trading environment for the IHL Group and to acquire control of it cheaply. The independent board stopped short of accusing FWA of being disingenuous by using inside information to drive their agenda.
The board has revealed that while FWA is critical of the recent and current performance of the company, the management team of Imara currently comprises of four executive directors, three of whom are also directors of FWA. In an interesting twist, the independent says Imara’s board of directors has been pressing the management team, most of the members of which are now directors of the FWA, for its promised strategy proposals, which have not been forthcoming and have delayed the implementation of various key decisions by the board of directors.
“The Independent Board considers that a conflict of interests is created when members of the management of the Company, who have not articulated a strategy to deal with the numerous issues facing the Company, form part of the Offeror, which has made the Offer at an Offer Price which the Independent Expert has confirmed undervalues the Company.”
Given the prevailing financial environments in countries where Imara operates, the short to medium term prospects of the company are uncertain and the Independent Board is unable to confirm that the business of the Company, in its current format, will be profitable on a sustainable basis, until there is an improvement in the current adverse cyclical factors affecting it.
Prices for cereals or staple foods in Botswana and other Southern African countries continue to rise at a slower pace, following trends in the global markets, according to the latest November 2022 Food Price Monitoring and Analysis by Food Agricultural Organization (FAO) of the United Nations.
Running a digital businessMTN Business Solutions Botswana, popularly known as MTN Business is an Internet Service Provider. We are a subsidiary of MTN Group Limited, a multinational telecommunications Group headquartered in South Africa, which operates in 19 markets across Africa and the Middle East.
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Botswana Institution Of Engineers (BIE), has last week hosted a gala dinner in which they appreciated engineers who worked tirelessly and with dedication for 10 years from 1983 to steer the BIE to its current status.
The event that was held at the Phakalane Golf Estate had brought together young, experienced and veteran engineers and was held under the theme “Vitalize the dignity and eminence of all professional engineers”.
Explaining the theme, the institution’s treasurer, Thanabalasingam Raveendran said that engineers were looked upon reverentially with respect as the educated but with time it seems to have deteriorated. He indicated that there is a need to change the narrative by all means.
“The BIE exists for the welfare and the betterment of us Botswana engineers, we need to recognize specialised units within our Institution. We Engineers strongly believe in Engineers make it happen” Raveendran said.
He indicated that under the theme they appeal to all engineers to energize, to attain quality of being worthy of honour and respect and to achieve recognized superiority amongst the Society.
Raveendran stated that engineers need to ensure their end product is of good quality satisfying the end users expectations and engineers must be honest in their work.
“Approximately 8000 engineers registered with Engineering Regulatory Board (ERB) are not members of the BIE, engineers need to make every effort to recruit them to BIE” he said.
He alluded that BIE being a society, it currently needs to upgrade itself at par with professional institutions elsewhere like the UK and USA.
He further stated that BIE has to have engineering units of specialised disciplines like Civil/Mechanical/electrical etc
“As President Masisi indicated in his inaugural speech, the young people, who make 60 percent of the population of this country, are the future leaders and therefore investing in them is building the bridge to the future” said Raveendran
Kandima indicated that BIE has a memorandum of Understanding with Engineers Registration Board (ERB), where BIE is a recognised provider of CPD training, mentorship programmes and more importantly IPD undertaking to upgrade the skills and know-how of our engineers.
“For us to achieve our mandate and make worthwhile changes to engineering in Botswana, we have to be totally focused and act with intent” said Kandima.
Furthermore, Stephen Williams, past president of the BIE from 1986-1988 told the engineers that the BIE provides a fertile environment where they can meet, share ideas and grow professionally.
“The BIE is also a nesting place for graduate engineers to learn from their peers and seniors, it also cater for engineering technicians and technologists and so nobody in the technology field is left out” he said.
He further indicated that Botswana Government provides a conductive environment for growth of engineering professionals.
“It must be stated that the Botswana Government recognises the existence of BIE and it can further be stated that the government enables ERB to carry out its mandate as a regulator of engineering professionals” said Williams
He plead with engineering companies to recognize and support BIE as it is the only source of engineering personnel’s for various Industries .
Furthermore, when giving his farewell speech, Michael Pinard , a past president of the institution said how they are viewed as engineers by the general public might be due to some lack of appreciation as to exactly what role they play in the development of the country.
“The BIE slogan is aptly coined-Engineers make it happen, in other words, what man dreams engineers create” Said Pinard.