Denel wishes to place on record that it does not have a “new partner” at its LMT business division, as alleged in Business Day (“Questions over new Denel partner). The headline is misleading because Kwane Capital is not a partner to Denel. Also, as a matter of principle, Denel as a state-owned enterprise (SOE) will not support LMT sourcing funding from a company that is under investigation by any organ of state.
LMT Holdings is a valued strategic asset to Denel, which we have supported with business and resources throughout the five years it has been part of the group. As a 51% Denel-owned company it receives this support in the same way as all other Denel-owned businesses.
The company has experienced business challenges of a financial and management nature. However, Denel rejects the allegation that it is the cause of LMT’s challenges.
At the beginning of the current financial year Denel intervened decisively in LMT by seconding a CE from the group’s head office.
Denel’s priority with regard to LMT is to source urgent funding. Despite many requests to the company’s other shareholders, Denel has been the only shareholder that has been granting loans to LMT during the period that it has experienced financial challenges.
Denel’s interest with respect to third-party offers is to secure funding for LMT without any changes to the existing shareholding structure.
Contrary to the article, it was an LMT shareholders’ resolution that, given the financial difficulties LMT was faced with, all shareholders should try to secure third-party funding. This is in line with the memorandum of incorporation. It was common industry knowledge that LMT was experiencing financial difficulties. Kwane Capital provided an unsolicited funding bid. This was not unusual because at the time the bid came through Denel was talking to other third-party funders. It was only on receipt of this offer that Denel started engaging with Kwane Capital to consider the offer and establish whether it was worthy of being presented to the LMT shareholders.
All unsolicited bids LMT has received over the years have always been subject to a due-diligence and valuation process because, more often than not, they are presented with very little information. As far as we are aware, no Denel employee engaged with Ritam/Kwane Capital about LMT prior to receipt of the offer.
Background checks were done. However, we were not aware that Kwane Capital or any of its related companies were under investigation by the Special Investigating Unit. As a matter of principle, Denel as an SOE will not support LMT sourcing funding from a company that is under investigation by any organ of state.
After the unsolicited offer was presented to Denel, we presented it to the rest of the LMT shareholders, where a decision was taken that a meeting should be scheduled where all shareholders would have an opportunity to consider the offer. This was the standard approach to all prospective third-party funding offers.
We need to highlight here that Denel has no authority to dictate to other shareholders who they sell their shares to. While we have been reliably informed that there is already an in-principle agreement between all the minority shareholders of LMT and Kwane Capital on a deal, Denel is not involved in this process. We will interact with it once it has been officially brought to a shareholders’ meeting. Thereafter Denel will take the matter to all its relevant decision-making structures.
LMT remains a very important division to the Denel business and the group will continue to support it as we cannot allow it to fail.
Acting group CEO, Denel