Graft-hit EOH weighs sale after turning a profit

The meager market valuation of the company is pushing its CEO and board to look at options including the potential sale.
Image: Moneyweb

EOH Holdings CEO Stephen Van Coller is considering a sale of the graft-tainted South African IT firm after returning the group to profitability, according to people familiar with the matter.

The former Absa Group and MTN Group executive is seeking advice on how to price the company, said the people, who asked not to be identified as the plan isn’t public.

Read: Zondo praises EOH for coming clean, but says it cannot keep the proceeds of corruption

No final decisions have been made, and options other than a disposal could still be considered, they said.

“We are exploring all opportunities to maximise value for shareholders,” Van Coller said in an emailed response to questions on the matter.

“Now that we are turning a profit this has opened up many opportunities for shareholders.”

EOH Share Price

The deliberations come almost four years after the CEO was appointed to try and turn around Johannesburg-based EOH, which later emerged to have been previously involved in a series of government-related corruption scandals that came to light after Microsoft Corp severed ties in early 2019.

Read:
EOH now stabilised after selling almost 80 businesses to pay down debt
Can EOH become the poster child for crisis turnaround?
Microsoft terminates more agreements with EOH

The turbulence has put pressure on the stock, which has tumbled 86% since 2018, valuing EOH at 952 million rand. That’s even after reporting a return to positive earnings per share in the six months through January.

Suing directors 

Van Coller has overseen a mass departure of executives, including the founders, and the company said last year it would look to sue former directors for more than R6 billion.

EOH has also sold more than 80 entities over the past 30 months, reducing gross debt from 4.1 billion rand to 1.65 billion rand, Van Coller said Wednesday.

Read:
EOH sues founder Asher Bohbot for R1.7bn
Former EOH finance chief John King dies amid R1.7bn damages claim

A further R500 million is expected to flow into company coffers over the next six months from disposals, he said.

The meager market valuation of the company is pushing Van Coller and the board to look at options including the potential sale, said the people. The CEO may see the company perform better as a private entity, they said.

Shareholders “need to guide the board as to what they want us to do in the next growth phase,” the CEO said.

© 2022 Bloomberg

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The directors should be in jail.

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