RMH Holdings is in a dispute with some of its minority shareholders following the disposal of its investment in Atterbury Europe.
RMH said Friday that after the vote for this disposal, RMH shareholders owning 18 770 019 RMH shares, or 1.3% of RMH's issued shares, exercised their rights in terms of the Companies Act, demanding an offer for cash at fair value.
An analyst, who did not wish to be named, told Business Report the dispute involved the sale of the stake in Atterbury Europe, the “crown jewel” of RMH, comprising strongly performing assets in Central and Central Europe, at a 20% discount to book value, at the bottom of the property cycle, when the rand was as strong as R15.82 to the dollar, and which caused a more than R500m loss to book value.
“Its diabolical. It was no distressed sale. RMH’s management were incentivised to sell, so even though it was at a loss, they will still get their bonus,” he said.
RMH said Friday: “These shareholders have applied to court. RMH gave notice of its intention to defend…its plea was handed in on December 6, 2022. After the plea, the plaintiffs submitted a notice of exception on December 22, 2022.”
RMH responded by submitting a joinder application to court, which was heard on June 1, and the application was unopposed. All the shareholders demanding an offer for cash are now joined.
“The next step will be for the exception to be set down for hearing and for the parties to deliver their heads of argument,” the group said, adding that shareholders would be updated as the matter progresses.
Meanwhile, for the year to March 31, RMH’s legal expenses increased sharply to R9 million.
RMH said its net assets fell to R1.42 billion from R3.91bn a year before, due the disposal of Atterbury Europe, and a R1.97bn special dividend.
The board increased the dividend paid in October by R250m, lowering cash resources for operating expenses and liabilities.
The group unbundled its last financial services investment, a 34% interest in FirstRand, in June 2020, leaving its remaining assets in RMH Property. The listed investment holding group’s strategy is to monetise its remaining interests.
Towards this, it paid a R1.1bn special dividend in May 2021 and it disposed of its stake in Atterbury Europe to Brightbridge Real Estate in September 2022.
The disposal, at 82% of the IFRS carrying value, delivered a nominal rate of return of 23% over the life of the investment, and the profit based on cost price of R1.08bn. The disposal resulted in an IFRS accounting loss of R589m, RMH said.
In relation to RMH Property and its remaining investee companies, RMH said it would continue to execute its role as a supportive and enabling shareholder. The policy was to pay no dividends, distributions would be made as assets were monetised. Audited results were expected to be released on July 29, 2023.
Cash resources for ongoing RMH operating expenses and liabilities amounted to R206m (R392m).
Excluding the results of Atterbury Europe, RMH made a R66m operating profit, compared to a R69m profit a year before.
This was mainly due to higher interest rates, with increases in cash balances for a period delivering an increase in interest income of R17m and fair value income of R13m; a decrease in fair value of the Divercity and Ascencia-linked preference shares, an increase in the expected credit loss on the Integer loan, and the reversal of the fair value of a financial guarantee contract, as well as equity-accounted earnings of investments falling by R26m.
Operating expenses fell R8m due to an increase in the share-based payment liability in the prior period, higher legal costs and a R3m increase in tax.
RMH and its subsidiary, RMH Asset Holding Company, are also involved in arbitration about the terms of financial guarantees made to Rand Merchant Bank, as security for a loan RMB provided to Atterbury in 2016.
In terms of the agreement, if Atterbury was of the opinion it did not have sufficient cash to repay the loan on July 8, 2023, it may issue a conversion notice to RMB, and might be permitted to repay all or part of the amount due by converting the loan to equity.
“RMH disagrees with Atterbury's interpretation of the definition of ‘sufficient cash resources’ as defined in the facility agreement entered into between RMB and Atterbury in July 2016,” RMH said Friday.
In the event of Atterbury issuing a conversion notice, RMH would decline the conversion notice, and steps would then have to take steps to resolve the dispute, RMH said.
BUSINESS REPORT