FinX
HARARE – Under normal circumstances, Meikles Limited losing some of its key assets for an unreasonably low figure, through a court judgment would have made big headlines. Meikles is not only listed on the Zimbabwe Stock Exchange, but it also is one of the oldest companies with iconic assets such as the Meikles Hotel and the Tanganda Tea Estates.
In December 2013, Meikles Limited entered into a consultancy agreement with Widefree Investments trading as Core Solutions, a company linked to industrialist Joseph Kanyekanye. The mandate of the agreement was that Core Solutions would assist Meikles Limited in recovering funds owed to Meikles by the Reserve Bank of Zimbabwe.
The legal action against Meikles stem from a debt of $1.4 million, which was commission for recovering Government debt owed to the company. In an effort to recover this, the auctioneer sold shares in Meikles Hospitality, which has interests in Meikles Hotel and its buildings, Victoria Falls Hotel, shareholding in Mentor Africa Limited, a company which owns The Cape Grace Hotel in South Africa. Tanganda Tea Company which owns tea estates was also sold as part of efforts to recover the same debt.
This sale alters the shareholding structure of Meikles as it kicks out the majority shareholder while Murray Lynton-Edwards whose bid won, becomes a shareholder.
As an aside, the story about the debt owed to Meikles is not fully finalised and is the subject of another court case.
Meikles has since filed an application challenging the arbitral award under case number SC 988/18 and as reported by Business Times last year, lodged a complaint about Supreme Court Judge Francis Bere over alleged conflict of interest in a ruling he made in favour of Widefree against the quoted firm. This is because Kanyekanye who is one of the directors at Widefree is a long standing client of Bere Brothers, a law firm founded by the judge and which has to this day Justice Bere’s own brother as partner of the firm.
Meikles has also filed an application challenging the auction of its properties saying that the sale was improperly conducted, was sold for an unreasonably low price and even then for more than the amount required to satisfy the debt and that no valuations had been done prior to the sale.
According to the objection made by the Meikles company secretary Thabani Mpofu, the sale was improperly conducted as the auctioneers had earlier on indicated that the auction had been cancelled, including sending a text message confirming the cancellation. LM auctioneers accepted a bid of approximately $2.7 million for Meikles’ properties with an estimated value of $100 million.
Mpofu says the sale was improperly conducted as the auctioneers had earlier on indicated that the auction had been cancelled, including sending a text message confirming the cancellation. The company only learnt of the rescheduled time of the auction through rumour. However, once an auction has been cancelled from the originally advertised date and time, it cannot proceed to be carried out at another time without properly re-flighting the time and notice of sale in a widely circulating newspaper as stipulated by High Court of Zimbabwe rules. It is on this basis Meikles is seeking a relief from courts.
Meikles argues that the price ($2.7 mln) the auctioneers accepted as the auction price is grossly unreasonable as it presents a tiny fraction of the value of the said property which is estimated at around $70 million. “The disparity in the price accepted by the auctioneers and the value of the property is of such magnitude as to render the sale a total mockery of justice in its gross unreasonableness.”
According to a past judgment on a similar case, the Sheriff should, before he can be satisfied that the price is reasonable, consider the auctioneers’ reports, which would give an expert opinion on whether or not the sale would realise a reasonable value for that property on a forced sale. The judgement in the previous case stated that where the property is sold for 25% less than the value on a forced sale, the price would not be reasonable and the sale should not be confirmed. Meikles’ market capitalization was $126 million as at January 4 2019 and this supports the company’s argument that the sale value was unreasonable.
Mpofu said there had been misrepresentation that valuation had been based on the real time value of shares of Meikles on the ZSE. However, the shares which were being sold are subsidiary companies and value is not reflected on the market.
Mpofu said if the auctioneer and Widefree Investments were only interested in recovering the judgement debt, they would not have sold a quarter of the shares in Tanganda. He says that the fact that Meikles Hospitality, a huge entity with interests in Meikles Hotel as well as its buildings, Victoria Falls Hotel and shareholding in Mentor Africa, a company which owns vast tea estates, can be sold to recover $1.4 million is a malicious act.
Mpofu argues that the intention of the auctioneers and Widefree was to conduct a public auction as if it was a private treaty as the judgment creditors own people were to bid for the shares had it not be for the presence of Lynton Edwards. He adds this was clearly an attempt at fraudulently disposing the shares and changing the shareholding. “This was clearly an attempt at committing a criminal offence.” Interestingly, Lynton-Edwards married from the Meikles family.
Meikles has referred the issue to the Criminal Investigations Department Commercial Crimes Division.
Meikles is expected to issue a statement apprising shareholders of the current status of its legal challenge although had the ZSE been paying attention, it should have requested the company to issue a cautionary statement.
Impact on minority shareholders?
It looks like the country underestimated the impact of a recent arbitrary sale of property of Meikles and in the process exposed the ZSE and the lack of protection of minority shareholders and to an extent has brought to the fore questions about the capacity and the fairness of its justice system. It essentially means Meikles shareholders have lost value as significant assets are, until the courts decide otherwise, are now owned by the person who won the bid at the auction.
The agriculture and hospitality segments have been performing above expectations though the best within the group are the supermarket chains. Just recently, Meikles was said to be in talks with Albwardy over the disposal of Meikles Hotel. In the half year to September, both units reported a double digit growth in revenue and improved EBITDA as shown in pic below.
