VALUATION WRANGLE
Thebe in dispute with departing Shell over value of its stake — matter in arbitration
Thebe Investment Corporation has confirmed that it is in a dispute with Shell over the value of its 28% stake in Shell Downstream South Africa (SDSA) and the matter has gone to arbitration. This comes in the wake of the oil giant’s announcement that it is divesting from SDSA.
Thebe Investment Corporation (Thebe) confirmed in a statement on Wednesday weekend media reports that it was at loggerheads with Shell over the value of its Shell Downstream South Africa (SDSA) shareholding.
“A dispute has arisen between Thebe and Shell as to how Thebe’s shares should be valued.
“Thebe believes firmly that its approach is the correct one, and that it is consistent with the agreed valuation formula,” says the statement, sent in response to Daily Maverick queries days ago.
“Since April 2023, Thebe and Shell have held several meetings to try and resolve their valuation differences. These meetings have not been fruitful, and to resolve the impasse Thebe has referred this matter to arbitration in terms of the provisions of the shareholders agreement. This process is underway.”
The Sunday Times reported that Thebe values its stake at $200-million, but Thebe made no mention of the figures that are being contested.
Shell confirmed earlier this week its intention to divest its downstream South African operations – effectively its more than 700 forecourts – after a comprehensive global review of such assets which it flagged in March.
Read more in Daily Maverick: Shell confirms intention to divest from South African downstream operations
“During the divestment process, we will work to preserve Shell Downstream South Africa’s operating capabilities, maintain the Shell brand presence, and secure the best possible outcome for our people and customers in South Africa under new ownership,” Shell said.
It made no mention of its exploration or production activities in South Africa, which have drawn the ire of conservationists.
Thebe is tied to the ANC and its relationship as a BEE partner with Shell has been seen by critics as a way for the oil company to score points with the ruling party.
Read more in Daily Maverick: After the Bell: The case in favour of Shell leaving SA
Shell said in its statement on Monday that its decision to exit from SDSA was not “taken lightly” – with that kind of political baggage, that is probably the case. But it also makes business sense as Shell pivots to EV charging offerings and the pickings on that front in South Africa are slim.
Read more in Daily Maverick: After the Bell: Does SA’s slow embrace of EVs explain Shell’s departure?
Thebe for its part denied implications in the local press that the divestment stemmed from a “strained relationship” between itself and Shell.
In its statement on Wednesday, Thebe said its SDSA stake “was acquired through a combination of debt funding and use of Thebe’s own cash resources. As is typical in transactions of this nature, Thebe had a put option, exercisable at its election, to exit its investment by selling its shares back to Shell at a predetermined valuation formula.”
It went on to say that its board decided to exit that stake two years ago but “… Shell delayed the conclusion of the sale transaction”.
This, it seems, has given rise to the punch-up over the value of the stake, a matter that Shell has yet to comment on.
It all provides some illuminating background for any company interested in buying Shell’s downstream assets in South Africa, which may prove to be an upstream paddle. DM
Corporate greed falls out with corrupt government cadres.
Thanks Ed, I have enjoyed this bit of “Schadenfreude” with my morning coffee.
Who owns Thebe?…
According to its website:
46.79% Batho Batho Trust
23.54% Main Street 1485 (employee equity scheme)
16.66% Main Street 1547 (management equity scheme)
9.66% Sanlam Private Equity
2.44% Umhlomulo Equity Participation
0.89% Individuals
As for Batho Batho, it is owned wholly or in part (unclear) by the ANC — see DM’s 2022 article, ‘Mantashe says ANC had ‘foresight’ to invest in Shell-affiliated Batho-Batho Trust to get R15-million payout’. Batho Batho Trust has donated the maximum-allowed R15 million to the ANC for three years in a row.
Thebe appears to genuinely be a savvy investor, and has played a part in a large number of profitable ventures: SA Express (sold off back in 2000), Club Travel, Netstar, a Unilever subsidiary, joint ventures with McMillan and Cape Union Mart, and a hundred other lesser-known names. They sold/merged Tepco Petroleum to Shell as part of the deal between them. If there’s any red flags, it might be the number of times it has sold assets to state-linked enterprises, such as SAA and Telkom, but there’s no indication that it wasn’t done at fair market value.
The value of the shares is not clear because they are not traded.
If Thebe claim their 28% is worth billions, will they offer to buy the balance at the same multiple.
Any third party would be wary of buying into this fight.
Thebe has enjoyed 30 years of dividends. The only reason Thebe exists is because the ANC invented BEE. Let Thebe disclose how many poor people were uplifted by their investment in Shell. How many schools did they build? How many roads did they fix? After all the doctrines of BEE were to uplift the poor. The reality is that the poor remain poor and unemployed while a few cadres became incredibly rich.
An excellent set of questions, but pigs will fly before you get any answers.
Well, the stated aim of BEE was to increase the number of black-owned businesses, and thus a racially-diverse ownership of the economy, as a redress for the long period when black people were legally barred from business ownership. The focus on making that ownership more broad-based is a bit more recent; initially the goal was the mere existence of black industrialists where there was none before.
So no, building schools or fixing roads doesn’t actually have anything directly to do with it. That’s what taxes are for (and even BEE beneficiaries pay those).
Was Thebe’s dividend income stream only based on income from the forecourts.
I’d love to hear what the ANC, sorry Thebe, value their contribution at.
I heard one analyst saying Shell valued itself at RO or something like that. The dispute then is that Thebe is worth nothing
Money for nothing, and my BEE for free.
Amazing all the statements from Thebe are anonymised – no director no head of investor relations…… and oh look who turns out to be one of the directors – our formerly glorious Nhlanhla Nene ex Min of F. Nice soft landing then