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The president of the Western Province Rugby Football Union, Zelt Marais. (Photo: Ashley Vlotman / Gallo Images)
In another addition to Western Province Rugby Football Union’s catalog of incompetence, the company that loaned it R112 million as part of a settlement for the development rights of Newlands Stadium is poised to initiate legal action against the union.
Last year, the Western Province Rugby Football Union (WPRFU) was a case study in how not to run a business.
On Thursday, Flyt Property Investment, the company WPRFU courted after it breached an agreement with Investec to rebuild Newlands, formally declared a dispute with the union.
Hours later, the New York-based consortium MVM, which offered to buy a 51% equity stake in the professional arm of the union for $ 6 million (R100 million), formally withdrew its stake. It is understood that it will happen to sharks.
“Given recent media speculation, we thought it was important for Western Province rugby players, coaches, management, sponsors and supporters to share that MVM Holdings has decided to cease negotiations with WPRFU and pursue other opportunities in professional rugby.” , reads a statement from MVM’s main investor Marco Masotti.
That was the least of the blows WPRFU suffered that day, considering that President Zelt Marais had blocked MVM for months and the deal was almost more than weeks ago, despite attempts by the Americans to keep him alive.
The biggest blow came with the news that Flyt, who replaced Investec at the 11th hour in June this year, was claiming damages from the WPRFU.
“Flyt Property Investment and a partner company, Dream World Investments (‘the Flyt Group’), formally filed a claim with the Western Province Rugby Football Union for damages,” said Flyt Property Investment CEO Zane De Decker in a release.
“The claim arises from the repudiation of the WPFRU and the breach of the binding agreements it concluded with Flyt Group in June 2020 for the planned development of the Newlands rugby stadium and other properties owned by the WPRFU.
“The WPRFU approached the Flyt Group for a loan of R112 million to settle its impending debts and conclude a development agreement in June 2020. This was only 30 days before its existing outstanding payment obligations with Investec expired and Remgro for R112 million.
“The strong balance sheet and ability of Flyt Group to fund a deal of this magnitude without bank financing, and associated delays, meant that it could act quickly to consider advancing the funds that the WPRFU was seeking.
“WPRFU President Zelt Marais called the successfully concluded transaction ‘the deal of the century.’ It is therefore a surprise that the WPRFU now appears to be looking for a way out of the settlement it sought and on a land value it determined, which was also concluded after a comprehensive and transparent approval process. “
Checkered history
In June, Marais refused to approve the sale of Newlands development rights to Investec, which had taken 18 months to complete. The heads of agreement were signed in December 2019 and Investec advanced the union R50 million to cover its debts that same month. But at the eleventh hour, Marais stepped back.
In an email to Daily maverick On June 30, Marais confirmed that careful due diligence had been conducted on the Flyt deal, even though negotiations only began on June 3.
The Flyt Group advanced to the WPRFU a loan of R112 million to cover its debt with Investec and R58 million owed to Remgro.
The WPRFU also signed the mortgage bonds of 11 properties it owns to Flyt as collateral for the loan.
“With the uncertainty of the market, due to Covid-19, Dream World Investments required additional security, so WPRFU has offered its other properties as collateral under the loan agreement ”, confirmed Marais to Daily maverick in the email.
“This is far better than any previous deal that has been on the table. It will ensure the long-term and sustainable future of rugby in the western province. That is our absolute priority. ”
However, five months into the deal is already falling apart because it appears that under the alleged leadership of the Marais, the WPRFU is not fulfilling its part of the deal. It’s the same modus operandi that soured the Investec deal and drove MVM away.
All obligations fulfilled
The WPRFU had not responded to the allegations made by Flyt at the time of publication.
“The Flyt Group has met all the requirements of the agreements to date,” De Decker said. “These include the payment of the R112 million guaranteed loan to the WPRFU; the incorporation of the Newlands and Brookside DevCos; and the appointment of a board of directors for both companies, which had begun holding company meetings to plan the planned developments.
“Despite the Flyt Group’s compliance with the concluded agreements, the WPRFU has inexplicably chosen to replace STBB as its legal advisers with a new trial attorney, and has deliberately reneged on the transaction.
“The WPRFU has done so by now objecting that the agreed land value is at the core of the transaction and, through its conduct, is acting in blatant disregard of the binding nature of the agreements.
“It is important to note that the agreed land value was proposed by WPRFU, not by Flyt Group. This value has subsequently been incorporated into the Newlands and Brookside DevCo, which are co-owners of WPRFU and Flyt Group. To demand that the price be increased six months after the conclusion of the agreement is simply outrageous. “
Movement of the goal posts
Daily maverick understands that the WPRFU now wants Newlands Stadium to be valued at R370 million, and not the R112 million it agreed with Flyt. That figure was reached based on the outstanding debts of the WPRFU and was what was contractually agreed.
But, as has been the case with several of the Marais deals, it was the WPRFU that came up with the numbers and months after making the deal, it then attempted to move the goal posts.
MVM Holdings made its offer in August and inserted a 45-day exclusivity clause to negotiate with the Marais and the WPRFU. Despite MVM’s efforts to finalize the deal to buy an equity stake in WP Rugby, the professional arm of the business, Marais allowed the 45-day clause to expire. According to MVM, Marais obstructed any constructive negotiations.
“Everything Zelt Marais has done through this process is indicative of selfish interests,” said MVM investor Michael Yormark. Daily maverick last month. Yormark is also Chairman of the influential management company Roc Nation, which counts Siya Kolisi, Maro Itoje and Cheslin Kolbe among its major rugby clients.
“He doesn’t care what is best for the players, the fans, the sponsors and the community. He only cares about one person, and that is himself, ”Yormark said.
“The franchise is undercapitalized and needs professional management. It has a huge advantage, but it will never reach its potential with the current management structure and current leaders running the show there.
“MVM also wants to develop an infrastructure that can support the players and that can provide an incredible experience for fans in Cape Town and around South Africa. But Zelt isn’t listening.
“The constant fabrication of the deal structure that has been presented by Marais in the media is frankly an insult.”
Family pattern
The pattern is now sadly familiar. Heads of Agreement were signed for Investec’s property division to purchase the Newlands development rights in November 2019. Investec advanced WPRFU R50 million to help offset its debt.
But when it came time to sign the final agreement, Marais resisted. It stated that there were suspensive clauses that Investec had not complied with, but the reality was that the WPRFU kept changing the agreed terms, thus creating suspensive conditions. It was the same situation with MVM.
MVM wanted a 51% controlling stake, so the WPRFU was unhappy. Marais was quoted in the media as saying that he could not sign an agreement with MVM because the conditions had not been met.
“We agreed on all the terms, he keeps changing them. It continues to remove the clause on a controlling interest, which is not negotiable for us, ”said Yormark. “Every time we send the headings to the terms, [he] changed the term sheet. “
But now he seems to have gone one step further with Flyt. Because, unlike the negotiations with Investec and MVM, the WPRFU has a binding contract with Flyt, and not just heads of agreement.
“The Flyt Group has received comprehensive legal advice from a senior attorney and is assured of its rights under properly concluded agreements with the WPRFU,” said De Decker.
Accordingly, Flyt Group will now sue for damages under the settlements, as it is entitled to do. Flyt Group is in the process of quantifying its substantial damages which, in addition to its direct costs, will include losses incurred as a result of the missed opportunity to develop both the Newlands Stadium and the Brookside property as the parties intended. “ DM
