R1.7 billion Renergen deal that soured

New details emerged about a failed R1.7 billion Renergen deal. The buyer said they were refused access to perform due diligence on the Virginia Gas Project assets, but Renergen said funding problems collapsed the deal.

The story starts in October 2016 when Nedbank CIB contacted Renergen through Integrated Capital Management with a deal to acquire 75% of the company.

Nedbank CIB acted as the corporate advisor and investment bank for Imbani Capital for the proposed transaction.

Although the discussions about a potential transaction started in August 2016, the official expression of interest (EoI) through Nedbank CIB was done on 22 October 2016.

Tshepo Phiri, who served as Imbani Capital CEO, told Daily Investor that the plan was to buy 75% of Renergen’s shares for R1.666 billion.

Following the expression of interest, Phiri and other stakeholders were taken on a tour of the Virginia Gas Project.

He said at the time, there was not much infrastructure at the site. They were shown a pipe with natural gas burning, but there were no helium testing or demonstrations.

Following the site visit, discussions between Integrated Capital Management (ICM), who represented Renergen, and Imbani continued.

Integrated Capital Management featured prominently in the Commission of Inquiry into Allegations of State Capture.

According to Phiri, ICM pressured Imbani to sign a deal quickly. They were told that Afrox was also keen to buy Renergen – especially with the Linde deal looming.

However, Imbani had no confirmation of the value of the assets they were buying and wanted to do their own research on the Virginia Gas Project.

Imbani and its capital providers wanted six weeks to carry out due diligence on Renergen, which included:

• A site visit and inspection of all mining and processing areas.
• The mineral resources and reserves.
• Mine planning.
• Legal and financial review, including access to management accounts, budgets, and cash reports.
• Rehabilitation and environmental provisions review.
• The pipeline of additional renewable energy projects under consideration.

He said when Imbani insisted on their own technical and financial due diligence before signing the deal, the discussions took a nasty turn.

Phiri said ICM became extremely aggressive. They allegedly refused a competency persons report and even started to swear at Imbani during a meeting.

Without doing their own due diligence, Imbani couldn’t progress with the deal as they did not know what they were really buying.

Phiri said Renergen CEO Stefano Marani then informed them that they had to work with Deloitte instead of Integrated Capital Management going forward.

Despite the change in representatives, Imbani was still not allowed to do its own due diligence on the Virginia Gas Project.

They were also not furnished with independent, audited documentation which confirmed Renergen’s claims regarding the Virginia Gas Project.

Phiri said Renergen refused Imbani access to the project site to do their own research, which ultimately scuppered the deal.

He said Imbani backed away from buying a majority stake in Renergen because of the lack of credible evidence about its potential.

Renergen responds

Daily Investor asked Renergen about the discussions with Imbani, and the company said funding was what really scuppered the deal.

Renergen said Imbani Capital approached ICM to meet a shareholder to discuss a possible transaction. 

Imbani proposed a transaction to acquire 75% of the shares in issue. However, this could not be consummated between a single shareholder as no one held that level of shareholding.

Renergen said it was approached to issue shares as a top-up to obtain the requisite 75% shareholding.

The Renergen board insisted on receiving a binding offer underpinned by confirmation of proof of funding before it would allow formal due diligence on the company.

“Imbani Capital never provided a binding offer or proof of funding for the transaction,” Renergen said.

“It only provided soft expressions of interest from two banking institutions it was dealing with. The Board declined to take discussions further.”

“Negotiations were strictly between the buyer and seller, and the seller did not have access to inside information to share and, as such, was not an insider,” Renergen added.

Renergen added that it did not receive any formal approach from Afrox to acquire a stake in the company.

No feedback from ICM and Afrox

Daily Investor tried to contact Integrated Capital Management for comment, but the company was “deregistrated due to annual return non-compliance”.

We tried to contact its company directors and a lawyer representing the group but were unsuccessful in getting feedback.

Daily Investor contacted Afrox to ask about its alleged plans to buy a stake in Renergen, but it did not provide comment.

Afrox and Linde also did not want to comment on the current status of their relationship with Renergen.

However, they asked that an image with a Linde Tanker at Renergen’s Virginia plant be removed. Linde did not elaborate on why it did not want its tanker associated with the project.

Daily Investor asked Nedbank CIB and Deloitte for feedback regarding the failed deal, but the companies did not respond.