Old Mutual’s feet-dragging stalls our divorce, says NMT Capital’s Sango Ntsaluba

Two months after a very public divorce, with both protagonists vowing they want out, Old Mutual and NMT Capital have still not cut their ties to go their separate ways. And true to their acrimonious divorce, they both can’t agree whether they have actually divorced, and trade accusations about who is responsible for the delay.

On 2 September 2019 Old Mutual announced as part of the presentation of its financial results that it was in the early stages of talks to divest from its 20% stake in NMT Capital, a company co-founded by Peter Moyo, who since June has twice been fired and twice reinstated by a court as chief executive.

NMT Capital, in which Moyo holds a 25% interest and is its former chief executive, hit back two days later with a dramatic, if emotional, statement welcoming the departure of its “bullying” and “disruptive business partner”.

Except, it turns out, no separation has occurred. Old Mutual is still a 20% shareholder in NMT. And the former partners cannot agree who is responsible for the delay.

On 2 May, NMT Capital received a letter from the firm Bowmans, representing Old Mutual, writing to say the insurer wants to sell its 20% stake in the investment firm, said NMT’s executive chairman Sango Ntsaluba in an interview with Daily Maverick at the investment firm’s Johannesburg offices.

“We agreed with their valuation and asked to move the matter forward. We kept asking them for an account in which to pay the preference share capital (redemption). And they kept ignoring us,” said Ntsaluba. NMT never received the account number in which to pay the proceeds of the capital redemption.

Settling the capital amount on the redeemable preference shares was the easy part. Said Ntsaluba: “Finally, we just used the account into which we had always paid their preference dividends. We settled their preference share capital of R47-million. We paid them on 27 August.”

On this, the parties agree. Said Old Mutual spokeswoman Tabby Tsengiwe: “NMT Capital voluntarily elected to fully redeem the redeemable NMT Capital preference shares including all current and arrear preference dividends on 27 August 2019 in the amount of R47-million.”

But that is the end of the points in which the former partners agree. “They are no longer preference shareholders here,” said Ntsaluba.

Tsengiwe begs to differ: “Old Mutual's other exposures to NMT-related preference shares remain payable to the amount of R297-million.” She said this relates to the whole NMT Group and its subsidiaries.

But dealing with the ordinary shares in NMT is a different matter altogether. For a transaction to be concluded there must be a seller and a buyer. With unlisted ordinary shares, the selling party must fill in the CM42 form, populate it with the offer price and other details, and then sign it. Only then can the buyer accept the offer.

“We are still waiting for Old Mutual to sell us their shares,” said Ntsaluba. “On June 25 we reminded them again that we accept their valuation of the shares and that they must sell us the shares,” said Ntsaluba. “We are still waiting.”

Old Mutual, for itself, says the negotiations are ongoing as the insurer wants to sever all ties with NMT Group.

“The parties are in the process of negotiating Old Mutual’s exit from Old Mutual’s positions in NMT Group, not just NMT Capital. As such, further commentary thereon is premature at this stage,” said Tsengiwe.

NMT’s relationship with Old Mutual has become the first casualty of the insurer’s imploded relationship with its former chief executive Moyo.

According to Old Mutual, the problem started on 4 July 2018 when NMT declared a R105-million ordinary dividend be paid ahead of paying a preference share dividend owed to Old Mutual. Moyo chaired the meeting and proposed the dividend declaration.

The three other directors and shareholders present – Ntsaluba, Tlelai, and Mobasheer Patel (not a shareholder), who had been a nominee of Old Mutual to the board of NTM – supported the proposal.

Ntsaluba admits the ordinary dividend was paid immediately thereafter. But Ntsaluba also insists that a preference share dividend was declared at the same meeting.

“The reason it was not paid immediately is because we had been engaged in talks with Old Mutual about rolling the preference share arrangement, which had expired on June 30,” said Ntsaluba.

“We had been discussing options to extend the preference share agreement and the interest (thereon). NMT wanted to extend the capital redemption together with the interest. It’s not true to say we ignored our obligations regarding the preference share agreement.”

With a debt instrument, as opposed to equity, according to South African law, preference shareholders are first in line when it comes to distributions in the invest company.

It is Old Mutual’s contention that this obligation was ignored at the meeting in question. What makes it particularly galling for Old Mutual is that the meeting was chaired by its own employee, Moyo, in his capacity as a non-executive director and shareholder of NMT Capital.

Moyo founded NMT in 2002 with Ntsaluba and former Don Group chief executive Thabiso Tlelai. Moyo owns 25% of the firm, and thus received R31-million of the ordinary dividends.

At the time, Moyo was employed as the deputy managing director of Old Mutual. In 2004 and the following years NMT entered into a series of transactions with the insurer, including Old Mutual’s acquisition of a 20% stake in the firm for R5.5-million. This was followed by Old Mutual advancing about R196-million in funding tied to preference shares in NMT, presumably to help the black investors raise funds to participate in BEE deals.

NMT’s 2004 acquisition of a stake in property company Growthpoint’s R1-billion was only one of the transactions that required Old Mutual’s funding.

At some point around this time, Moyo resigned from his Old Mutual job and took up employment as the chief executive of Alexander Forbes. He also took directorships elsewhere.

Fast-forward to 2017 as Old Mutual was involved in a deep restructuring that resulted in the unbundling of its stake in Nedbank and Quilter to investors. Moyo again took up employment as Old Mutual’s chief executive.

As its chief executive, Moyo had a fiduciary duty to put the insurer’s commercial interests ahead of his own personal interests. The insurer contends that by declaring and paying himself the ordinary dividend, Moyo contravened his obligation to his employer. Thus he broke the trust vested in him as a senior executive of Old Mutual.

In May, Moyo was suspended from his job at Old Mutual as a result. He was fired for the first time in June, but the high court reinstated him to his position, on account of the insurer’s failure to subject him to a disciplinary hearing. Old Mutual appealed the verdict, but before the appeal could be heard, it fired him again in August. Moyo won another round in court, with the high court ruling he must be reinstated to his position.

Old Mutual has thrice barred him from resuming his duties ahead of its appeal.

This week Moyo slapped the insurer with a lawsuit demanding a quarter of a billion rand in damages for his dismissal.

But NMT is concerned about being the grass that suffers under their feet when two elephants fight. According to Ntsaluba, Old Mutual is just stringing his company along.

“They keep telling everybody they are divesting from NMT, but they are not. They are just stringing us along for nothing. They hope to find something in NMT they can use against Peter Moyo.”

What makes NMT particularly aggrieved is that the dispute between Moyo and Old Mutual “has nothing to do with us” but NMT is suffering as the proverbial grass as the elephants slug it out.

Of course, NMT also cannot resist taking sides in the matter. Ntsaluba said Old Mutual “appears to have resolved to make NMT Capital a convenient human shield or scapegoat to deflate attention from matters that they (Old Mutual) need to address in their ongoing disagreement with their CEO”. BM