Davidson Iriekpen with agency report
The dispute among members of the Ibru family over the ownership of Federal Palace Hotel in Victoria Island, Lagos, was one of the reasons cited by the South Africa’s hotel and gaming group, Sun International, for pulling out of Nigeria.
Reuters reported monday that Sun International was the latest South African business to exit Nigeria because of weak economic growth and clashes with regulators and shareholders.
In January, the Economic and Financial Crimes Commission (EFCC) launched a probe into Sun International’s initial investment in Tourist Company of Nigeria (TCN), which owns and operates the five-star Federal Palace Hotel in Lagos.
TCN was founded by the scion of the Ibru clan, Chief Michael Ibru, and his younger brothers – Alex and Goodie Ibru.
Sun International then bought a 49-per-cent stake of the Nigerian Stock Exchange (NSE)-listed TCN in 2006, becoming the largest single shareholder in the company.
In recent years, however, Sun has been drawn into a dispute between the family of the late Mr. Alex Ibru, who also founded The Guardian Newspapers, and his younger brother, Goodie, who was the Chairman of Ikeja Hotels Plc – owner of Sheraton Hotels and Towers in Lagos and Abuja – before he was forced out by its shareholders two years ago.
In a lawsuit filed in 2012 by Alex Ibru’s widow, Mrs. Maiden Ibru, who is currently the Publisher of The Guardian, she sought for the winding up of the Federal Palace Hotel.
Mrs. Ibru, who filed the petition on behalf of Omamo Investment Corporation, wanted the hotel wound up over a N2 billion debt.
According to the petition, she stated that TCN borrowed various sums: US$7.1 million, N610 million, N381 million and N19 million, between 2003 and 2004 which had not been paid back despite repeated demands for repayment.
She also alleged that the company was insolvent, had failed beyond resuscitation, lacked sufficient assets to meet its liabilities, and did not have the capacity to meet the conditions for which it was incorporated and had suffered a total erosion of capital.
Based on the averments, Omamo prayed the court to appoint a provisional liquidator in the person of the President of the Institute of Chartered Accountants of Nigeria (ICAN) to supervise the winding up of the company.
The lawsuit continued in the courts until Goodie Ibru’s forced ouster by the shareholders of Ikeja Hotels.
His removal, which was later upheld by a Federal High Court in Lagos, was also spearheaded by Mrs. Maiden Ibru.
Sun International, which also reported yesterday a 20-per-cent fall in diluted adjusted headline earnings per share (AHEPS) to 628 cents for the year to June, said the Federal Palace Hotel had been hit by slow economic growth, low oil prices, the threat from militant group, Boko Haram and a weakening naira.
“The board has decided to exit Nigeria and steps will be taken to achieve this in a manner that does not erode further value,” the company said in a statement yesterday.
“Continued setbacks in Nigeria as well as the ongoing shareholder dispute have frustrated all attempts to develop and improve the property,” it added.
Sun International’s decision to exit Nigeria followed food and clothing retailer Woolworths and Tiger Brands, which sold its loss-making Nigerian arm to Dangote Industries.
Nigeria is suffering its worst economic crisis in decades as a slump in oil revenues hammers public finances and the naira. The central bank governor has said recession is likely.
Analysts said Sun International’s dispute with fellow investors was at least as important in its decision to leave.
“They are in a way stuck in a problematic arrangement on the property and it’s been very difficult for them to create value there. It certainly makes sense for them to reduce exposure to Nigeria,” said Avior Capital Markets analyst De Wet Schutte.
“Nigeria is a difficult place to build a business.”
CEO Graeme Stephens said the exit could take a year or two, and the company was no longer committed to expanding in Africa.
“We’ve been strategically exiting Africa for a couple of years and what was left was Nigeria. We’re not looking anywhere else in Africa,” Stephens told Reuters, adding that the company would focus on growing its Latin America business.
In June, Sun said it was disposing its remaining minority interests in Zambia, Botswana, Namibia, Lesotho and Swaziland to Minor International Public Company.
Shares in Sun International were down 0.47 per cent by 1139 GMT on the Johannesburg Stock Exchange (JSE).
Reporting its results, the company said poor economic conditions in South Africa resulted in revenue growth at casinos of only 0.8 per cent to 7 billion rand ($515 million).
“In South Africa, the economic environment remains a serious concern. We do not anticipate any meaningful growth in gaming revenue until there is a recovery in the economy and renewed consumer confidence,” Stephens said.
The South African Reserve Bank expects the economy to flat-line this year, due to a drought and falling commodity prices.