Puno-Mustek wrangle set to continue
A STAND-OFF between Mustek and its black empowerment shareholder Puno could drag on for months, with Puno opting for further legal action after dismissing Mustek’s offer to buy back its shares at net asset value.
Puno said Mustek’s (MST) offer was so low it would be out of pocket by the time it repaid a loan it raised to fund its original buy-in, and after it paid the legal fees amassed by trying to resolve the dispute.
Instead of accepting the cash, Puno will seek leave to appeal a high court verdict that Mustek has the right to claw back the shares.
Puno owns 30% of Mustek’s subsidiary Brotek, and Mustek wants to repossess the shares so it can strike an empowerment deal at holding company level instead. Initially the partners agreed Mustek would buy back the shares for R32m, of which R20m would repay the loan plus interest and Puno would retain R12m.
Yet the protracted negotiations soured, and Mustek won legal permission to hold Puno in breach of a loan agreement for failing to produce a certificate guaranteeing that the empowerment consortium really was majority black-owned.
Puno spokesman John Poluta said the offer would leave Puno with R1,7m after it repaid the loan, but its legal fees would wipe that out. Instead of capitulating it would continue the legal battle, which could continue until the end of the year.
“We believed Mustek was willing to negotiate a settlement and would look to pay something other than the minimum, but clearly it is not. There is no goodwill left. We have no choice but to file an application for leave to appeal.”
Poluta argues that Mustek won its case on a technicality, when the judge ruled that the empowerment audit compiled by Deloitte was not an acceptable certificate. Puno will appeal on the grounds that the document it received from Deloitte was acceptable evidence of its empowerment status.
It will also argue that the loan agreement — which lets Mustek oust Puno within five days for breaching its terms — must be read in conjunction with a shareholders’ agreement drawn up simultaneously.
The shareholders’ agreement gives Puno six months to remedy any faults, so it could have its empowerment profile recertified in a format that the court would then find acceptable.
“We have gone through our legal options very carefully. We think the Supreme Court could give us a remedy period to provide an adequate certificate,” Poluta said. “If we are successful we will have six months to fix it and the opportunity to keep our shares. Mustek is trading near an all-time low, so we don’t want to sell our shares at this point.”
Mustek CEO David Kan said: “We made a net asset value offer to purchase the shares from Puno and it was turned down.”
Kan believes Puno is unlikely to succeed in winning the right to appeal the original verdict.
Puno would also be incurring even more fees by continuing to fight as the judge has already ordered it to foot Mustek’s legal fees as well as its own.
If Puno lost again, its legal fees would definitely wipe out the residual net asset value of the shares after the loan was repaid, Kan said.
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