Thebe Investment Corporation has refused to state publicly how much its 28% stake in Shell Downstream SA (SDSA) was worth, saying it preferred to leave its valuation to independent experts.
This comes as news reports emerged that Thebe was claiming the value of its stake in SDSA was worth R3.7 billion, as Shell’s local empowerment group seeks to sell its equity after 22 years.
Thebe board member Dr Molefe Tsele told Business Report on Friday it would be premature to put a figure on Thebe’s stake, as many factors needed to be considered when doing a proper valuation of their investment.
“No, we have deliberated on that question, and then we took advice to let’s allow arbitration to deal with that. Because the reality of the matter is that there are two things you need to consider,” Tsele said.
“The first one is we have made an investment of real cash in that business, which was not vendor-financed, which was not discounted, which was a straightforward transaction of acquiring a certain percentage with our own funds.
“So even if you were to say that we initially invested R73 million, what would be the value of that 20 years down the line? You can arrive at that even if it’s a very modest inflation of about 5%.”
Tsele also mentioned a complex web of calculations that would also need to come into consideration in the formula to evaluate the worth of their stake.
“Our auditors always come with a formula, what they call a discounted cash flow. And it’s largely easy to arrive at because it’s driven by the volumes sold at your 600 stations in the previous year,” Tsele said.
“And then you start discounting marketability. If all the oil industries discounted about 25%, you do that. Then you do the BEE discount, then you do the foreign currency risk discount, then you do the country discount such as problems with Transnet, and then you arrive at the figure.
“And then if all of you agree, this is a figure we can give to the bank because all our lenders wait for this figure every year. They want to know what is the value in our books. It doesn’t come from us, it comes from a process that is mutually agreed. We carry that number (in our books) year after year. Obviously, it will grow as the volumes grow. It will go down as certain events happen. You’ll factor that in that number. But it is a living number…
“We do have a number, but we don’t want to basically make it public. We want to allow the process to come with a number. And if we are happy, we will accept. And if we are not happy, there are processes of appealing that.”
Tsele said Thebe had in March proposed to forward the names of three senior counsel and that Shell should propose theirs as well, so that they select a three-member panel who would independently make the valuation.
“Now we are talking about mid-May, they’ve not yet given that list of three. So that is where we say the good faith commitment to resolve this means that each party must do its best endeavour to come to the party rather than wait for three months to pass before you can respond to something that was agreed,” he said.
“Unless it’s been delayed intentionally, such as if they knew that they were going to be exiting. So therefore resolving this matter was not a priority… In their mind they can simply say whoever buys their 72% will deal with this matter later, which unfortunately is not the right way to go about (it).”
SDSA spokesperson Pam Ntaka declined to answer specific questions sent to her, saying SDSA would not comment on confidential shareholder agreements and relationships.
BUSINESS REPORT