The National Union of Mineworkers (NUM) said it was unhappy after the gambling and hotel company, Tsogo Sun, which decided to give R200 million unsecured loan to five of its executives on an interest-free basis.

The Union called on its peer unions the South African Commercial, Catering and Allied Workers Union and the Food and Allied Workers Union to fight Tsogo Sun and ensure that not only a “few rich individuals” were empowered.

These executives will use the cash to buy about 7.6-million Tsogo Sun shares.

The National Union of Mineworkers said it was “disgusted”.

“It can’t be an empowerment just for a few people,” NUM spokesman Livhuwani Mammburu said this week.

What makes this skirmish particularly interesting is that Tsogo Sun director Marcel Golding, former deputy general secretary of the NUM, supports the R200-million loan.

Speaking this week, Tsogo chairman Johnny Copelyn slammed NUM, saying the union had done a similar deal at gaming company Peermont Global, which owns the Emperor’s Palace casino near OR Tambo airport, and other assets.

“It is absolutely no different to a transaction they themselves did at Peermont where they cut the management into a deal to take Peermont private some years ago without involving any of that company’s employees,” he said.

Copelyn said that unlike in Tsogo’s case, the Peermont managers who benefitted in that case did not take the debt personally, so they had no downside on the under performance of the share.

Sasha Naryshkine, a director at Vestact Asset Management, said there was nothing wrong with Tsogo Sun’s loan: “We’re not all equal. Life isn’t fair.

“Marcel von Aulock [Tsogo Sun CEO] didn’t get where he is by doing nothing.”

The loan was split unevenly between Von Aulock (R86-million), CFO Rob Huddy (R27-million), HR director Vusi Dlamini (R20-million), Tsogo Sun Gaming MD Jacques Booysen (R47million) and legal director Graham Tyrrell (R20-million).

At the vote on Tuesday, which lasted all of 30 minutes, the lone dissenting voice was that of perennial corporate-governance activist Theo Botha.

He asked Copelyn why the loan had not been extended to more executives as there was a chance that perceived favouritism could create dissent in the top echelon of the company’s leadership .

Copelyn’s view was that this would have “been unaffordable” as the next grade of executive management consisted of 40 people. Copelyn said that since the five executives who received the loan had to give up their involvement in the previous “phantom — share scheme”, animosity from the next tier of executives was unlikely.

The phantom-share scheme involves the directors being given ‘pretend shares’, where they benefit from any increase in the share price. A phantom scheme is a win-win as situation as they stand to make only the positive difference between what the share price was initially, and the price when the stock is “sold”.

If the share price drops, nothing needs to be paid in.

But in Tsogo Sun’s new loan scheme, if the shares lose value when the five directors cash out, they will still be forced to pay the difference as the full loan must be repaid.

This executive incentive scheme is one of the sideshows in a much wider deal, in which South African Breweries will sell its 435 million shares in Tsogo Sun — equating to about 40% of the company.

One of the consequences of this deal is that Tsogo’s largest shareholder, black-empowerment conglomerate Hosken Consolidated Investments, will see its shareholding increase from 41% to almost 48% in the gaming company.

The deal was done in two tranches. In the first, R294-million placing shares were sold to enthusiastic institutional investors at R25.75, giving SAB R7.6-billion.

In the second part of the deal, Tsogo Sun bought back, and then cancelled 134million shares at R21, amounting to R2.8-billion. This deal will be finalised early next month.

Tsogo Sun, which has a market cap of R32-billion, was trading at R27.15 on Friday — just below the R28.11 which KPMG said was “fair and reasonable”.

Source: SA Commercial Prop News – I-Net Bridge