Sabir Argaw Seeks Enforcement to Buy Foreign Partners Out of Repi


The plaintiff paid four million Birr in court fees




Sabir Argaw, one of Ethiopia’s prominent businessperson with diversified interests under AL-SAM Plc, has filed civil suit taking his foreign partners to the Federal High Court, claiming an enforcement of a disputed buyout worth 370 million Br, and punitive damage.

Wilmar Europe Holdings BV, Wilmar Edible Oils BV and Wilmar Resources PTE Ltd, all based in Singapore, are the defendants in the charge, which is one of the largest civil litigation in the country’s history. Both the plaintiff and the defendants are shareholders in Repi Soap & Detergents Share Company and Repi-Wilmar Industries Share Company. The suit was filed at the Ninth Bench of the Federal High Court at Lideta, on February 17, 2017, after the plaintiff deposited four million Birr in court fee.

Sabir and the defendants have long-standing business transactions in imports of palm oil before they entered into a joint venture arrangement, in 2014. The parties in the joint venture wanted to engage in setting up no less than 14 factories in agro-processing, with a projected investment cost of seven billion Birr. After the valuation of the companies under the family of Sabir, who has eight children, Willmar invested the equivalent amount to control 50pc of the shares in each company.

While the Singaporean company brought onboard its board chairperson and general managers, Sabir’s two sons, Kamil and Mufid, were placed to serve as managing and marketing directors.

The Repi Soap & Detergent SC., a.k.a Repi, is located in Sebeta, 20Km west of Addis Abeba. The military government nationalised the plant in the mid-1970s, a year after it was established, and put it under the supervision of what was then the National Chemical Corporation. The company, known for its brands of powder soap, Rol, and bar, Ajax, was reincorporated as a state enterprise in 1992, with a capital of 1.5 million Br. In the mid-1990s, it was the first to introduce liquid detergent, Largo, before it was put into a joint venture with Lena Plc, a subsidiary company of AL-SAM, which took 51pc shares. The following year, LENA bought the government out of its remaining shares.

The joint venture with the Singaporean company came into life in early 2014, following deals made with Wilmar International, a company established in 1991. Operating in no less than 50 countries, Wilmar has 450 manufacturing plants processing oil palm, oilseed crushing, edible oils refining, sugar milling and refining, fertiliser production, and grain. It employs close to 90,000 people.

Through the joint venture here, Wilmar wanted to build an integrated manufacturing complex in Dima, and Sebeta, that would have incorporated an edible oil refinery and packing plant, production plants for specialty fats, soft oils, soaps and detergents, as well as a facility for sesame seed processing.

However, disagreements arose over the direction the new enterprises should take, and both sides decided to dissolve the venture. They agreed to have an international audit firm to carry out a valuation of their assets, where Ernst & Young was hired to do the job. The FIrm employed “discounted cash flow” method to determine how much these companies are worth and reported that the lowest value of the shares was just over two billion Birr, and the highest was about 2.2 billion Br.

Wilmar sent out an email on December 1, 2016, stating that it would recognise Sabir’s right to buy them out, according to the plaintiff’s filing. Sabir in return asked the defendants the price they would be willing to accept, in a letter written on December 2, 2016, states the charge.

The plaintiff claims that after Ernst & Young had done the valuation, the defendants commissioned their valuation and found the companies to be worth a total of 740 million Br. The defendants allegedly presented Sabir with three options: for him to sell his shares to them; to buy them out; or to come to an agreement to sell the shares to a third party. The suit also claims that they told Sabir their offer would expire on December 9, 2016.

While Sabir was making preparations to execute the terms of the contract, the defendants sent a new offer on December 13, with close to 10 points as preconditions, claims the charge. The new offer has no effect for, “an offer and acceptance were made at earlier dates, qualifying it as a valid contract”, alleges Sabir. An offer was made while communicating the value of the companies and the plaintiff had returned expressing his desire to buy the defendants’ shares for 370 million Br, through an email sent on December 9. Sabir owns 20pc and 24pc shares in the two companies, while members of his family own 30pc and 26pc shares, respectively.

The defendants reject this, presenting their 13-page statement of response at a hearing held on April 2. Represented by their lawyer, Mesfin Tafesse, the defendants have challenged the charge on the accounts of jurisdiction to preside over the case and the absence of “cause of action”. The defendants want to see the dispute resolved presenting the case to three arbitrators both parties select, and following arbitration rules prescribed by the International Chamber of Commerce Arbitration Tribunal. The parties should notify each other of the disagreements they have before setting up this tribunal, and resolve their disputes within 10 weeks starting from the day disputes arises, claims the defence.

Despite the defence claim that there is no cause of action for the suit, Sabir’s lawyer, Million Assefa, argued communications made on December 9, 2016, does establish a contract of “offer and acceptance”.

However, this was merely communications about matters referring to their long-standing business transactions, the defendants claim. This cannot be considered a contract, for the parties “did not express their agreements to all the terms of the negotiations,” Mesfin argued.

Meanwhile, the Court issued an injunction to freeze all the assets of the jointly held companies, as well as the transfer of dividends before it adjourned the case until May 2017.



By REDIET BAYE
FORTUNE STAFF WRITER

Published on Apr 14,2017 [ Vol 17 ,No 884]


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