Wealthy and influential investors behind SportPesa have fallen out over allegations of transfer of $278 million (Sh29.1 billion) from the company’s coffers to overseas accounts and sale of shares in the firm’s holding company.
The shareholder fight in the sports betting platform is pitting local majority shareholders against its foreign owners from Bulgaria in a row that erupted when SportPesa announced its return under Milestone, a business licensed last month.
Businessman Paul Wanderi Ndung’u and Asenath Wacera Maina, who have a combined stake of 38 percent, reckon they were not informed of the Milestone deal, which was made public by SportPesa CEO Ronald Karauri on Friday.
Mr Ndung’u reckons that local top shareholders of Pevans East Africa, the entity behind SportPesa in Kenya, were excluded from buying shares in the holding company — SportPesa Global Holding Limited (SGHL) — leading to dilution of their ownership in the UK-based firm.
SportPesa Global owns the European and Tanzania gaming businesses and recently claimed to also own the SportPesa brand, sparking protests from local shareholders led by Mr Ndung’u who claims that Pevans East Africa owns that betting platform and trade name.
The deal with Milestone was arranged on the strength that the brand belonged to SGHL and not Pevans East Africa, which was last year blocked from operating in Kenyan market seemingly due to a tax row.
Local shareholders are fretful that the deal, which was on Saturday blocked by the regulators, could have left Pevans East Africa a shell.
Foreign owners led by Bulgarians owned 80 percent of SGHL in January while they had a 47 percent interest in Pevans.
Mr Ndung’u, who holds a 17 percent stake in Pevans and 2.8 percent of SGHL, blew the lid on the shareholder wars that have been simmering since 2017.
In a statement issued yesterday, he accused Mr Karauri of having allied himself with the firm’s foreign investors to run the sport betting platform without consulting the board, notably local shareholders.
Ms Maina, another shareholder with a 21 percent stake in Pevans, demanded a forensic audit on the company starting from 2015, a push that has been resisted.
“After persistent push, the management report indicated that within three years Pevans has transferred over $250 million (Sh27.1 billion) to various offshore accounts in Isle of Man, Dubai and Las Palmas/Canary Islands,” Mr Ndung’u said.
“Shareholders have also come to learn that subsequent to ceasing operations, $500,000 (Sh54.3 million) has been transferred from Pevans to SportPesa South Africa while another $17.5 million (Sh1.9 billion) has been transferred to Sportpesa Tanzania. We want to know who the beneficiaries of these accounts are.”
He added that they will seek the help of the Central Bank of Kenya (CBK), the Financial Reporting Centre (FRC) — which tracks illicit wealth -- and Kenya Revenue Authority (KRA) to establish the ultimate destination of the funds.
Investigative journalism site Finance Uncovered has reported that Pevans has used complex financial arrangements to shift billions of shillings overseas while also paying less taxes in Kenya.
The shareholder war threatens to break the six-year partnership of wealthy, politically influential Kenyans and Bulgarian investors that helped found SportPesa, which made its huge fortune from the online betting craze in Kenya.
Last year, the government expressed concerns about young people becoming addicted to betting and falling into debt, and toughened its regulatory approach to the companies, suspending many licences including that of SportPesa.
Three investors from Bulgaria — Guerassim Nikolov of the ill-fated Toto 6/49 lottery, Valentina Nikolaeva Mineva and Ivan Kalpakchiev—are said to have provided the gambling and digital technology expertise in the partnership.
Mr Karauri owns a six percent stake in Pevans East Africa while Mr Nikolov has a 21 percent shareholding in the firm.
Other foreign investors in Pevans are American Gene Grand with a 21 percent equity and Bulgarians Valentina Nikolaeva Mineva (three percent) and Ivan Stoyanov Kalpakchiev (two percent).
Mr Peter Kihanya Muiruri, a cousin of President Uhuru Kenyatta, also recently emerged with a one percent stake in the company.
SportPesa grew rapidly in Kenya to dominate online betting with the government, the KRA and the investigative website, Finance Uncovered, all estimating the firm’s monthly revenues at between Sh6 billion and Sh8 billion — translating to annual sales to about Sh100 billion. The company, however, put its annual revenue at Sh20 billion under what it calls Gross Gaming Revenue.
In July last year, the State ordered the deportation of 17 foreign directors of betting firms operating in Kenya, almost a week after ordering telecoms firm Safaricom to stop processing payments for sports betting firms.
Mr Ndung’u reckons that there was a recent rights issue at SGHL in which some of the shareholders were invited to buy additional shares at discount, arguing that the move diluted excluded owners.
“SportPesa Global Holdings was a mirror of Pevans EA Limited. However, within this year the foreign shareholders have fraudulently transferred the shareholding to themselves along with their associates and the matter will be handled by UK Authorities,” he said.
According to previous regulatory filings, the single largest shareholder of SportPesa Global was listed as Mr Nikolov with a 34.7 percent stake.
Others are Naogen Investment Inc (33.1 percent stake), Ivaylo Petev Bozoukov (2.8 percent), Ivan Kalpakchev (3.1 percent), Mr Karauri (9.8 percent), Francis Waweru Kiarie (1.5 percent) and Robert Macharia (1.5 percent).
Ms Valentina Mineva has an ownership of 6.3 percent, Mr Ndung’u (2.8 percent), Ms Wacera (3.5 percent) and Mr Muiruri –the president’s cousin -- with a 0.5 percent.
SportPesa Global had a net profit of £11.8 million (Sh1.6 billion) and net assets of £21.8 million (Sh3 billion) in the year ended December 2018, according to the latest available records.
The Betting Control and Licensing Board (BCLB) blocked the Milestone deal, saying the trade name is owned by Pevans East Africa, which ceased operations in July last year.
The regulator accused Milestone of seeking to return SportPesa to business, arguing that the trade name is not transferable pending the conclusion of a suit that will determine which between Pevans and SGHL has rights to the trade name.
Milestone had indicated to the regulator that it had been authorised to use the SportPesa trademark by SGHL.
Its move to ride on SportPesa brand and platforms is seen as a bid to access the more than 12 million customers in the database.
Mr Karauri’s announcement was instantly greeted with enthusiasm on online forums.
Hundreds of bets were also placed on the platform between Friday evening and Saturday midday when the regulator stepped in to block the partnership.
Reviving SportPesa through Milestone would have also sidestepped a multi-billion shilling tax claim from the KRA.
Mr Karauri had not responded to our calls and text messages by the time of going to press.