Grit lost P47m in Letlole exit
Mbongeni Mguni | Monday November 13, 2023 06:00
Grit sold its 70.3 million shares, which represented 25.1% equity in Letlole, in four open market transactions on the Botswana Stock Exchange (BSE) between January and June. Each of the four transactions squeezed LLR’s share price down, from P3.48 at the time of the first sale, to P2.50 at the last.
In the year to October, Letlole la Rona was the worst performer on the BSE’s Domestic Companies Index, having shed 25% in its share price over the period, compared to an increase of 21.6%% over the same period last year.
However, writing in the group’s annual report released recently, Grit directors said the exit from Letlole had also cost the London-listed outfit.
The sliding share prices over the four sales meant that Grit’s 70.3 million shares in Letlole eventually netted about $16.9 million (P228 million) against the carrying amount of the investment of $17.1 million (P231 million), directors said.
Foreign exchange losses deepened the impact Grit took on the LLR exit.
“The largest contributor to the loss on disposal (was) the crystallisation of foreign currency translation differences that were recognised during the period in which the investment was held, and which arose due to the movement in the Botswana pula against the US dollar during the investment period,” directors said.
Grit directors said the proceeds from the disposal of holdings in LLR and three other hotels, were directed towards both debt reductions and towards the completion of other acquisitions.
Grit was LLR’s Africa expansion strategy partner, until at least March when the pan-African group said it was exiting the local entity as part of a revised growth strategy. At the time, Grit CEO, Bronwyn Knight, said the disposal would allow equity in the local group to be redeployed into “further resilient African impact development assets”.
However, other commentators said Grit’s momentum to exit LLR began in December after a heated Annual General Meeting where investors clashed over strategic control of the local property firm.
Shareholder tensions boiled over when Grit tried unsuccessfully to adjourn the AGM, citing “an urgent, significant and material matter”. BusinessWeek has since established that shareholders were concerned about Grit’s control of the Africa strategy and its dominance of the board.
The pan-African real estate firm at some point held 30% equity in LLR, second only to founding shareholder, Botswana Development Corporation with 40%. In 2019, Grit moved from a 6.25 percent stake in LLR to 30% through a non-cash deal valued at $13.8 million. Under the agreement, Grit issued new shares to the BDC at $1.40 each.
The BDC still holds 5.33 percent equity in Grit Real Estate Income Group, which wholly owns Grit.
LLR CEO, Kamogelo Mowaneng, has since said the local property group is seeking other partnerships to advance its expansion into Africa.