The battle for control of one of SA’s premier hospitality groups, Legacy Hotels and Resorts, is set to go down to the wire in a boardroom battle that pits Ensemble, an outfit backed by the Libyan sovereign wealth fund, against the company’s founder and celebrated hotelier Bart Dorrestein and associates.
This follows a high court order that Ensemble, which owns 39.79% of Legacy Hotels and Resorts, and Dorrestein’s Legacy Management Holdings (LMH) which owns 40.84%, together with an entity called Swanvest, which has a 19.39% stake in the group, go to a private auction and outbid each other for full control of the company.
The application was brought by Ensemble in a bid to break the boardroom stalemate between the warring factions, after relations between it, LMH and Swanvest broke down, in a case first reported by Business Day a year ago.
Legacy Hotel’s board is made up of five people, three representing LMH and Swanvest and two representing Ensemble’s interests — making the breakdown in relations all the more pronounced.
LMH, Swanvest, Dorrestein and his associates Brearley Patrick and George Yates unsuccessfully opposed the application and brought a counter application, seeking to compel Ensemble to sell its stake in Legacy Hotels and Resorts.
The company manages establishments such as the Michelangelo Hotel, the Michelangelo Towers, Raphael Penthouse Suites, DaVinci Hotel & Suites and The Leonardo, Africa’s tallest building.
Legacy Hotels and Resorts also manages two hotels in one of Cape Town’s biggest tourist destinations, the Victoria & Alfred Waterfront, The Commodore Hotel and its sister establishment, The Portswood Hotel.
The group also manages two properties in Kruger National Park — Elephant Point and Kruger Park Lodge — and four properties in the Pilanesberg Game Reserve — Bakubung Bush Lodge, Bakubung Villas, Kwa Maritane Bush Lodge and Tshukudu Bush Lodge.
Sanctions
LMH and Swanvest told the court that Ensemble’s links to the Libyan government were hurting Legacy Hotels and Resorts, particularly due to the international sanctions that the government has attracted over the years.
“The respondents complain that the status of Ensemble as a subsidiary company in the sovereign wealth fund of Libya during the presidency of colonel [Muammar] Gaddafi and the international sanctions visited on Ensemble’s holding entities have negatively affected the business of Legacy Hotels,” the judgment reads.
“The international sanctions mainly come from the UN Security Council, which are given effect to by various national governments, including SA.
“The respondents contend that the sanctions have affected the status of the company, which, according to the applicants, gave rise to a pattern of conduct on the part of the respondents and their hostility towards the applicants.”
Ensemble told the court that a private action, where only it, LMH and Swanvest would participate would be the only reasonable solution to break the impasse.
The arguments by Ensemble won over judge Leicester Adams.
“There can be no dispute about the fact that whichever party is to dispose of its shares is entitled to be paid fair value therefore. The applicants contend that a private auction inter partes [between the parties] will be the fairest mechanism,” Adams said in his judgment.
“The point of departure, so the applicants argue, is that the selling party (whoever that might ultimately be) is entitled to a prorated value of the entirety of the company. This can be achieved, so the applicants contend, by the private auction. I agree.”
One of the accusations brought forward by Ensemble was there were certain disposals of management agreements with customers of Legacy Hotels and Resorts to LHM.
‘Unilateral action’
“The respondents, so the applicants aver, have taken it upon themselves to take unilateral action to divert business of the company to other entities, associated with the director respondents and which the director respondents control,” Adams noted, ordering such activities be halted and LHM and Swanvest hand over to Ensemble Legacy Hotels and Resorts documents.
“The respondents claim this as a necessity to preserve ‘the business’ of Legacy Hotels. In so doing they effectively seek to remove the business from the company to other companies and seek to mitigate the conduct by suggesting that these other companies effectively ‘front’ for Legacy Hotels. There doesn’t appear to be much dispute about the aforegoing.”
Dorrestein, who over the years has had to fend off allegations that former Libyan strongman Gaddafi owned a stake in Legacy Hotels and Resorts, said they had given notice to appeal against Adams’s judgment.
“The allegations and any findings that any existing contracts have been transferred out of Legacy Hotels & Resorts are without foundation and is one of the many aspects of the judgment that is being appealed,” he said.
“We note further that the concept of a separation of shareholders by way of a private auction has no precedent in law and is one of the further elements of the judgment being appealed,” Dorrestein said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.