EOH Holdings informed its shareholders in a statement on Friday that the company’s black empowerment partner, Lebashe Investment Group, will not subscribe for a further R250-million tranche in the company.
The amount was to be the final part of a R1-billion investment in the tech company.
EOH said Lebashe attributes its decision to law firm ENSafrica’s ongoing investigation into alleged corrupt dealings at EOH Mthombo.
“Lebashe took a conscious decision to allow EOH to establish a new independent board of directors without representation from Lebashe until after the conclusion of the ENSafrica investigation and the determination of the impact thereof,” the statement said.
Earlier this year, reports surfaced around EOH Mthombo’s involvement in a suspect R120-million Microsoft software licensing deal with South Africa’s Department of Defence.
After an anonymous report detailing apparent irregularities around the deal was sent to the US Securities and Exchange Commission, Microsoft terminated the agreement.
Pending a decision by EOH’s new board, Lebashe’s non-subscription means it may have to forfeit 10 million EOH A Shares at R1 to EOH, as well as dividends on those shares.
“While the current economic dilution of the 10,000,000 EOH A shares is limited, the EOH A Shares each have the same voting rights as an EOH Ordinary Share and are therefore an important consideration in the deliberations of the New Board,” EOH said.
According to EOH, Lebashe is still committed to investing the final tranche of funding “subject to agreeing mutually acceptable terms and EOH shareholder approval.”
“Discussions between Lebashe and the new board are ongoing with the view to finding a solution that is in the best interests of all capital providers.”
Lebashe currently owns a 29% stake in EOH.
“We have enjoyed a valuable partnership with Lebashe over the years and look forward to exploring new, meaningful ways of evolving our collaboration for the benefit of EOH and Lebashe,” said EOH Group CEO Stephen Coller.