Companies

UK takeover of Sh2bn in SportPesa blocked

SportPesa CEO Ronald Karauri

SportPesa CEO Ronald Karauri. FILE PHOTO | NMG

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Summary

  • SPS did not name the party objecting to the dissolution and neither did it say why it is being liquidated.
  • The law says that a UK company can be dissolved by its creditors or if it fails to comply with its legal obligations.
  • Any interested party, including creditors, shareholders and employees, can object to a company’s application to be struck off the register and dissolved, making it critical to gain their support.

The proposed transfer of Sh2 billion worth of assets held by one of the SportPesa companies to the UK government has been opposed by an unnamed party, signalling a growing rift in the gaming firm’s empire.

Liverpool-based SPS Sportsoft Limited, which offers gambling software and support services, on Tuesday published a notice of its dissolution which will result in surrendering all its assets to the government.

The company, which has common shareholders with its parent firm Sportpesa Global Holdings Limited (SPGHL) and Kenya’s pioneer sports betting firm Pevans East Africa Limited, now says it has received an objection to its dissolution.

“Action under Section 1000 of the Companies Act 2006 has been temporarily suspended as an objection to the striking off has been received by the Registrar,” the company said in a notice yesterday.

SPS did not name the party objecting to the dissolution and neither did it say why it is being liquidated.

The law says that a UK company can be dissolved by its creditors or if it fails to comply with its legal obligations.

Any interested party, including creditors, shareholders and employees, can object to a company’s application to be struck off the register and dissolved, making it critical to gain their support.

“You may notify any other organisation or party who may have an interest in the company’s affairs, otherwise they might later object to the application,” the UK government says of the dissolution process.

The objection filed with SPS’ registrar indicates that the company did not inform or obtain approval of all key stakeholders.

If the objection fails, the company’s assets will be surrendered to the UK government, leaving creditors to suffer losses since the State does not inherit liabilities of a dissolved firm.

The move to wind up SPS comes after its biggest client, Kenya-based Pevans, ceased operations in 2019 after the government declined to renew its operating licence citing billions of shillings in unpaid taxes.

Pevans paid the Liverpool-based multinational £20.6 million (Sh3.1 billion) in the nine months ended December 2018, accounting for 96 percent of the total revenue of £21.6 million (Sh3.2 billion) in the period.

SPS clients include SPGHL’s subsidiaries trading under the SportPesa brand in Tanzania and South Africa.

SPS ended the period with total assets of £13.2 million (Sh2 billion) that will be surrendered to the UK government.

“Property, cash and any other assets owned by a company when it is dissolved automatically pass to the Crown. This is because the law says this happens,” the UK government says on the process of taking over ownerless property technically known as bona vacantia.

“Liabilities of a company do not pass to the Crown on dissolution: they are normally extinguished.”

SPS’s creditors risk losing a combined £8.5 million (Sh1.2 billion) that they were owed in the review period.

The company was required to publish its 2019 accounts by December last year but breached the deadline and could now be liquidated without releasing its updated financial statements.

Its dissolution marks another loss for its shareholders, including Kenyan entrepreneurs Paul Ndung’u and Asenath Maina who fell out with their Bulgarian counterparts over control and management of the SportPesa entities.

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

The company last reported revenues of nearly Sh150 billion in 2018 in what made it the second-largest firm by revenue in Kenya after Safaricom.

The Bulgarian investors and Ronald Karauri, a Kenyan who is Pevans’ chief executive and also a shareholder in the SportPesa entities, later re-entered the local gaming business in October last year under a new company called Milestone Games Limited to which they transferred the SportPesa trade name.

The valuable SportPesa brand was transferred from Pevans to SPGHL for £100,000 (Sh15.1 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 Kalina Karadzhova acted for SPGHL. Mr Karauri would later emerge with a controlling 54.4 percent stake in Milestone in the roundabout deals.

Mr Ndung’u and Mrs Maina were meanwhile removed from the boards of the SportPesa entities where their stakes were also diluted.

Recent filings by SPGHL in the UK shows that the stake of Mr Ndung’u 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 Mr Karauri and a group of Bulgarians, has meanwhile increased in a pattern that drew protests from Mr Ndung’u.

The ownership changes came through a rights issue, conducted between November 2019 and last year, in which some of the owners were offered an opportunity to buy more shares at deeply discounted rates.

The dilution saw Mr Ndung’u and Mrs Maina lose a combined Sh1.1 billion as their claims on SPGHL’s net assets declined.

The Kenyan investors are being squeezed out after SPGHL conducted the rights issue in which the other shareholders acquired a total of one million additional shares in two transactions at a price of £1 (Sh151.8) per share.

This was equivalent to 0.45 percent of the company’s book value per share of £218.8 (Sh33,234).