Africa Opportunity has had a setback in its dispute over its investment in Shoprite. In their half yearly report for the six months ended 30 June 2016 it was reported that the arbitration proceedings between the Company and Shoprite Holdings Limited had commenced in August 2016 and it was anticipated that the arbitrator would deliver his decision by the end of the year.
The arbitrator delivered his award on 27 January 2017. The arbitrator concluded that the Company did not obtain good title to 637,528 of the 679,145 shares of Shoprite that it believed it had purchased, and in respect of such shares, it was therefore not entitled to dividends that had accrued. Unless this award is reversed on appeal, and leaving aside any remedy that the Company may have to recover the original purchase price of the shares it believed it had purchased, the current estimated loss to the Company (including accrued dividends) is approximately US $5 million, which equates to a reduction in the net asset value (“NAV”) per ordinary share of approximately $0.12. The most recently released weekly NAV estimate for the ordinary shares was $0.901 per share as at close of business on 20 January 2017. The net asset value of the C shares is unaffected by the arbitration award.
The Board wishes to reiterate that it believes the Company has full and good title to all the shares in Shoprite which it purchased, primarily because the shares were sold on a recognised stock exchange to numerous parties. The Board intends to appeal this award and will continue working to recover full value for shareholders. Any such appeal must be notified within 15 court days of the award. However, in view of the current award and after consultation with AOF’s auditors, the Board has decided to take a full provision of $0.12 against the ordinary share NAV as the most conservative approach, pending the outcome of the appeal process. The next NAV to be announced by the Company calculated as of the close of business on 31 January 2017 will include this provision.
The Company will issue further announcements in due course to keep shareholders apprised of developments in this matter.
Background to the Shoprite arbitration
The Company acquired 679,145 Shoprite’s shares on the Lusaka Stock Exchange (“LuSE”) in the normal course of business through Zambian brokers. Shoprite shares were entrusted to a Zambian law firm, Lewis Nathan Advocates (“Lewis Nathan”), which served as transfer agent for the Shoprite shares listed on LuSE and also as attorney-in-fact for Shoprite to sell those shares. However, the law firm was accused by Shoprite in mid-2011 of selling the shares contrary to restrictions established by Shoprite. Shoprite further contended that it did not receive the proceeds from the trades made by Lewis Nathan. Shoprite has sued Lewis Nathan to obtain the proceeds from those trades. It has also placed dividends due to its shareholders on the Zambian register into an escrow account, pending the outcome of its lawsuit against Lewis Nathan.
The Company sued Shoprite in the Western Cape High Court in 2014 for unpaid dividends, agreeing subsequently to the arbitration which has culminated in the award of 27 January 2017.
AOF : Setback for Africa Opportunity in Shoprite dispute