Eskom, Transnet buy arivia.kom stake

By Martin Czernowalow for arivia.kom
Johannesburg, 05 Apr 2006

While the sale of Denel`s 22.98% stake in State-owned IT group arivia.kom has been concluded, there is little clarity about why the shareholding was transferred to transport and electricity utilities Transnet and Eskom, in apparent contradiction to government`s strategy.

According to defence group Denel`s spokesperson Priya Pillay, the other shareholders in arivia.kom (Transnet and Eskom) exercised their pre-emptive rights as per the shareholders` agreement, through a share buyback by arivia.kom in terms of Section 85 of the Companies Act, 1973.

This seems to contradict government`s well-publicised policy of disinvestment by State-owned enterprises from non-core assets, as part of a strategy to refocus parastatals on their core functions.

Pillay would not reveal the value of the stake, but says: "The disposal of non-core assets, like these, is part of a definite refocusing strategy embarked upon some time ago.

"Good progress has been made with these disposals," she states.

Short-listed bidders

Three bidders were short-listed for the stake, which was offered on tender by Denel, but Pillay refuses to name them. However, it appears arivia.kom bought back the shares, before Eskom and Transnet exercised their pre-emptive rights to the stake.

Prior to exercising their pre-emptive rights, Eskom and Transnet already held 31.96% and 45.06%, respectively, in the IT group. It is understood the 22.98% Denel stake has been split 58:42 between Eskom and Transnet.

Ministerial spokesperson for the Department of Public Enterprises Gaynor Kast would only say: "Arivia.kom does not form part of Transnet`s core assets. There is a process under way which will result in Transnet disposing of its interest in the near future."

Shareholder approval

Transnet communications GM John Dludlu refused to comment at all on the transaction. However, he previously said the transport utility is in the process of obtaining the necessary shareholder approval for the disposal of its entire arivia.kom shareholding.

Eskom spokesperson Fani Zulu also did not comment at the time of publication, but earlier said it would be unlikely Eskom would exercise its pre-emptive right to the arivia.kom stake.

It has also been suggested that, while Eskom is also in the process of disinvesting from non-core assets, it may not be too hasty to exit arivia.kom. Sources have speculated that Eskom is in a far better position to hold onto non-core assets as it is a profitable operation. Loss-makers Denel and Transnet, on the other hand, have greater liquidity requirements and need to strengthen their cash positions to deal with balance sheet difficulties.

Meanwhile, speculation is also rife that Denel`s need for an urgent cash injection prompted government to shift the stake in the hands of the other two shareholders, dashing hopes that the equity could go to an empowerment partner for arivia.kom.