Paul Ndung’u edged out of SportPesa ownership

Kenyan entrepreneurs Paul Wanderi Ndung’u and Asenath Wacera Maina are being squeezed out of the ownership of the international business of gaming firm SportPesa, marking an escalation of the fallout among the firm’s founders.

Latest filings by Sportpesa Global Holdings Limited (SPGHL) in the UK show that Mr Ndung’u’s stake has dropped to 1.54 percent, down from 17 percent when the multinational was incorporated in 2017.

Mrs Maina’s ownership on the other hand has declined to 1.9 percent from 21 percent over the same period.

The ownership of other shareholders, including Ronald Karauri and a group of Bulgarians, has meanwhile increased in a pattern that has not gone down well with Mr Ndung’u. SPGHL owns SportPesa subsidiaries operating in Italy, Tanzania, South Africa and Russia.

“Sportpesa Global Holdings Limited is now owned by the Bulgarians after… transferring Asenath Maina and Paul Ndung’u shares to themselves. The matter is due in court,” Mr Ndung’u said when asked for comment.

“Kalina Karadzhova and Ivalyo Bozoukov … continue diluting the major Kenyan shareholders with abandon,” he said in reference to the company’s remaining directors following his ouster from the board on December 7, 2020.

The Kenyan investors whose stakes have been diluted fell out with their fellow shareholders in 2017 over the control and management of SportPesa’s mainstay Kenyan business, which was previously run under Pevans East Africa Limited.

Mr Ndung’u has accused his peers, including Bulgarians and Pevans’ chief executive, Mr Karauri, of hijacking Pevans’ board and management besides making irregular transfer of billions of shillings to offshore accounts.

Pevans’ operating licence was cancelled in July 2019 over unpaid taxes and penalties that the Kenya Revenue Authority (KRA) now says stands at Sh95 billion.

The company last reported revenues of nearly Sh150 billion in 2018, making it the second-largest firm by revenue in Kenya after Safaricom #ticker:SCOM.

Mr Karauri and other directors of Pevans and SPGHL later worked behind the scenes to bring back the popular SportPesa betting brand in October 2020 under Milestone Games Limited, a new company whose ownership excluded Mr Ndung’u and Mrs Maina.

Besides shaking off the two Kenyan investors, the manoeuvre was also designed to sidestep Pevans’ tax and regulatory run-ins with the Betting Control and Licensing Board (BCLB).

The valuable SportPesa trade name was transferred from Pevans to SPGHL for £100,000 (Sh15 million) and then to Milestone in transactions that started on June 2, 2020.

Mr Karauri signed the deed of assignment on behalf of Pevans while Ms Karadzhova acted for SPGHL. Mr Karauri would later emerge with a controlling 54.4 percent stake in Milestone in the roundabout deals.

With Pevans practically dormant for more than a year, the shareholder squabbles have shifted to SPGHL where the dissenters are being squeezed out.

In the UK filings, SPGHL does not give reasons for the changes in its shareholding. Movements in shareholder lists are usually the result of sale of shares by some investors or a rights issue –a form of funding a company where shareholders are asked to provide additional capital.

Failure to participate in a rights issue can result in a shareholder being diluted by others who provide their proportionate share of capital or more.

SPGHL is sitting on retained earnings equivalent to more than Sh3.2 billion and is debt-free, according to the latest available financial statements, making a rights issue an unlikely corporate undertaking.

Minority positions

At the beginning, the company had 100 shares.

Over the years, however, the volume of stock has swelled to 1.1 million units. The shares held by Mr Karauri and the Bulgarians have, however, grown by relatively larger margins in what has seen Mr Ndung’u and Mrs Maina diluted to minority positions.

Mr Karauri’s stake, for instance, has risen to 9.8 percent from the original six percent while that of Guerassim Nikolov expanded to 35.8 percent from 21 percent.

An institutional investor, Naogen Investment Inc, was not there at the company’s incorporation but has since built up the second-largest stake of 34.18 percent.

A few investors have sold their SPGHL shares along the way. They include Gene Grand and Paul Kinuthia (who made his first fortune in cosmetics).

Mr Grand initially held a 21 per cent equity in the firm, while Mr Kinuthia had five per cent but the two had traded their stakes by January 2020.

SPGHL has not published its 2019 financial statements which were due by December 31, 2020. The reason for the delay has not been disclosed.

Mr Ndung’u, however, says the delay has been occasioned by the defection of various service providers including banks and auditors.

“The last time SPGHL filed their financials was for December 31, 2018. The accounts for 2019 and 2020 have not been filed. The reason is that, as per my press statement of November 2, 2020, the auditors KPMG and the tax advisers Deloitte and Touche in the UK had resigned in 2017 thus no auditors or tax advisers to date,” he said.

“The banks in the UK had requested SPGHL to close their bank accounts because of suspected money laundering and suspected tax evasion and price transfers. The only place SPGHL could open a bank account was Isle of Man where they opened an account with Standard Chartered Bank IOM."