eBusiness Weekly
Martin Kadzere
The High Court on Wednesday ruled in favour of Balasore Alloys Ltd in a case it was challenging the cancellation of its bid to acquire 70 percent shareholding in Zimbabwe Alloys.
The Bombay Stock Exchange listed firm filed an urgent application about two weeks ago challenging the termination of the deal by judicial manager Bulisa Mbano on grounds that Balasore had failed to inject the equity portion of its investment by April 30 this year.
Broadly, the $90 million transaction involves the settlement of pre-judicial management liabilities, acquisition of 70 percent stake of ZimAlloys by Balasore and injection of working capital for the refurbishment of the ferrochrome smelter.
Balasore, a Pramod Mittal group entered into a deal to buy majority shareholding of ZimAlloys consequent upon a scheme of arrangement sanctioned by the High Court on December 20, 2017. The company received the approval on January 8, 2018.
Balasore legal representative David Drury of Honey and Blackeneberg confirmed in an interview on Wednesday that “the judgment has been handed in favour of our client.”
On April 4, Mbano notified the major creditors of ZimAlloys and shareholders that a resolution had been made to terminate Balasore’s bid and would engage other bidders on the basis that the Indian company had failed to pay. But Balasore disputed that there was no factual or legal basis to support the termination.
Mbano took over as judicial manager from Reggie Saruchera sometimes in February this year.
“The purported JM has presented a ‘fait accompli’ notice to BAL that steps have been taken or are being taken to abort the court sanctioned scheme of arrangement and more particularly to engage alternative investors,” said Balasore.
“BAL has already invested heavily in time, money and resources to successfully participate in its successful bid, has engaged bankers and financiers in support of that bid.”
Balasore argued the scheme and the implementation was subjected to condition precedent.
According to Balasore, ZimAlloys was yet to meet conditions precedent. These include failure to obtain all regulatory approvals, securing an export license for chrome ores, guaranteeing that the secretarial documents are up to date, as well as failure to provide of ownership for 20 000 hectares of the claims. Balasore argued that since the conditions precedent outlined in the scheme of arrangement had not been met, “any payment obligation…cannot be triggered.”
However, in opposing affidavit, Mambo argued that with respect to the conditions precedent, the first payment was not subject to the fulfilment of the conditions precedent.
In any event, the applicant was liable to obtain the necessary approvals as stated in the scheme of arrangement document which they delayed and now wish to withhold making payment on the basis that the conditions precedent have not been met.
“It will be noted that there are actually no outstanding conditions precedent and therefore no basis for the relief sought by the applicant,” said ZimAlloys. “The applicant has created fictitious positions to delay the finalisation of the transaction.
“It is clear the applicant has no capacity to fund the transaction and now wishes to delay the transaction. In an event, the first payment as highlighted in the implementation cause was not subject to the fulfilment of the conditions precedent.
“The applicant in its own letters has on several occasions made a commitment to make the first payment to no avail. In a letter dated 27 February 2018, the applicant undertook to make the payment upon fulfilment of two condition precedent; namely obtaining of the export licenses and Exchange Control approval.
“These have since been obtained. In another letter dated 12 March 2018, the applicant sent a revised payment proposal to the 3rd respondent (Saruchera) undertaking to pay the creditors by bringing in the equity portion of their investment in two tranches of $22,03 million by 30 March and $23,3 million by April 2018. In spite of this letter, no payments has been received from the applicant. The judicial manager was therefore within his rights and mandate to advise the applicant of its failure to comply with the terms which were accepted by the members and credits and terminate the investment as per conditions,” argued Mbano.
In support of his argument that Balasore Alloys has no capacity to fund the transaction, Mbano claims Balasore approached some local bank seeking to raise the money.
“It is such absurdity that a foreign company after purporting to have the capacity to invest…now seeks to obtain funding from local banks. “We are actually aware that the applicant has been approaching local banks particularly Stanbic bank, NMB Bank, Barclays Bank and BancABC seeking local funding from the transaction.”
