PRETORIA – Within a year of the Public Investment Corporation’s participation in Jayendra Naidoo’s acquisition of 2.75 percent of Steinhoff, through his empowerment group Lancaster – dubbed Project Sierra – the Steinhoff share price began to decline and this impacted on the PlC’s security package.
This was the submission of PIC executive Botsang Morobe to the PIC Commission of Inquiry, who said as a result of this, Lancaster Group approached the PIC with a proposal for the PIC to consider facilitating Project Blue Buck, a transaction that would result in a change in PlC’s security package to a much more enhanced position.
Morobe, who is an associate principal in Isibaya Private Equity & Structured Investment Products (SIPs) at the PIC, said she could not confirm how the transaction was originated and whether there had been prior iterations of the investment proposal before her involvement.
“In May 2016, I was tasked to work on Project Sierra in my capacity as an investment associate. I received a copy of an investment proposal prepared by Symphony Capital … from Mervin Muller who was the acting executive head of Private Equity & SlPs at the time,” she said.
Morobe related to the commission how Project Sierra was taken through a series of Investment Committee meetings for consideration, but the committee members were not completely satisfied with the transaction and required the transaction team to do additional work.
She said the additional work that had to be provided by the transaction team included: submission of more information on the Lancaster Group; performing an enhanced due diligence on Jayendra Naidoo as he was considered a Politically Exposed Person; the contribution by Lancaster Group to be at least 5 percent of the transaction price, in line with the PIC BEE Policy; and the inclusion of a broad-based component to the transaction structure.
Morobe said the Investment Committee approved the transaction although she was not present at the final committee meeting.
The approval was for the PIC to provide a loan of R9.3 billion to Lancaster special purpose vehicle (SPV) – which was later registered as Lancaster 101 – for the acquisition of a 2.75 percent equity stake in Steinhoff including transaction related costs.
The ownership of Lancaster SPV would be 50 percent held by the Government Employees Pension Fund (GEPF), 25 percent by Lancaster Group and 25 percent by a B-BBEE group. Lancaster SPV would be capitalised by GEPF and Lancaster Group through a contribution of R50 million each.
The total costs for Project Sierra totalled more than R9.4bn broken down as R9bn for the acquisition of shares, R100m for transaction costs and R350m for a ratio collar premium.