Khalid Abdulla: Ayo has an ‘alliance’ agreement with BTSA. Picture: Hetty Zantman
Khalid Abdulla: Ayo has an ‘alliance’ agreement with BTSA. Picture: Hetty Zantman

The Ayo share price has seemingly been trapped at a low of R24 since the company announced that a deal, widely assumed to have been a slam-dunk, is off for now.

Investors may be waiting to hear when the deal will be back on, or to see some sign of the "list of acquisitions" Ayo referred to in a Sens statement in April. At the time, Ayo promised to announce details of all the transactions it intends concluding, in line with the JSE’s requirements.

So far there’s been no explanation why the proposed transfer of 30% of British Telecoms SA (BTSA) from African Equity Empowerment Investments (AEEI) to Ayo lapsed (see page 43). There has only been a bland statement: "Shareholders are hereby advised that the subscription agreement has lapsed and that the parties are engaging with each other to have the agreement reinstated. Shareholders will be advised should the agreement be reinstated."

The transfer of the BTSA stake from controlling shareholder AEEI, in exchange for R990m, was widely regarded as a significant reason why Ayo listed in December.

According to City Press, Ayo approached the Public Investment Corp (PIC) in 2017 to back its proposed listing so it could acquire the BTSA stake and aggressively grow its business.

"Apart from the R1bn that would go to AEEI for the BTSA stake, the PIC money would be used to ‘fund the rollout of the BT strategic relationship’," City Press reported, referring to an internal PIC memo.

Whatever the motivation, the PIC invested R4.3bn in Ayo’s listing, picking up a 29% stake and valuing the shares at R43 apiece. The rarely traded share slumped to R25 in March before recovering briefly. Eight months later, the PIC is almost R2bn out of pocket on its investment.

The PIC says it is still in support of the subscription agreement. "The PIC is comfortable … that the alliance agreement between Ayo and BT remains in place and thus the lapsing of the subscription agreement will not affect the operations of the company or any of the recent agreements entered into between Ayo and its clients."

It appears that three parties needed to agree to the BTSA transfer: Ayo, AEEI and BTSA. Given that both AEEI and Ayo are ultimately controlled by Iqbal Survé’s Sekunjalo Investment Holdings, and given that the transfer was a significant factor in the Ayo listing, it’s difficult to imagine the problem lies with either of these.

Asked for input, a BTSA spokesperson said: "Thank you for reaching out. We have no comment to make at this point."

AEEI CEO Khalid Abdulla says the business rationale for the transfer of the BTSA stake "was to house all ICT-related businesses under one roof, namely Ayo". He dismisses concerns that the collapse of the transfer will affect Ayo’s recently announced contract with Sasol, which relates to Sasol’s BT-based communications.

He says Ayo has an "alliance" agreement with BTSA aimed at growing market share with "various customers that require broad-based economic empowerment spend and service supply". This "alliance" is not affected by the equity ownership.

The collapse of the proposed deal comes at a tricky time for Sekunjalo: its key PIC ally, CEO Daniel Matjila, is facing increasing pressure, and a R400m-plus repayment is due to the PIC before the end of the month.

The repayment is part of the R1bn loan made to Survé to acquire control of Independent Media in 2013.