Blackstar deal reveals riches in the Tiso duo

Nonkululeko Sowazi and David Adomakoh have emerged from South Africa’s economic transformation poser, black economic empowerment (BEE), as super rich individuals.

The cofounders of Tiso Investment Holdings, Sowazi and Adomakoh, are about to graduate from the BEE game into fully fleshed private equity players.

This comes through the proposed merger between Tiso and London originated private equity player Blackstar Group. Blackstar announced yesterday a proposition which will see a reverse entry of Tiso into Blackstar. This deal is twinned with another remarkable proposition, Blackstar’s offer to acquire 100% of media giant Times Media Group (TMG).

Tiso which owns about 22% of prominent BBBEE investor, Kagiso Tiso Holdings (KTH), is set to inject its KTH stake into Blackstar. In return, Tiso will get about 35% of the JSE and LSE listed investment company Blackstar.

Yesterday’s announcement said Tiso is owned by two individuals Nkululeko Sowazi and David Adomakoh. Their 22% stake in KTH is valued around R2bn. Tiso is taking a combination of cash, R450m, and Blackstar shares from this transaction. All this is due to Sowazi and Adomakoh who may have some debt to sort out.

The merged operation, to be named Tiso Blackstar, will have net asset value of about R4.6bn. If the transction goes through Sowazi and Adomakoh will join the Tiso Blackstar leadership. They will be joining Blackstar founder Andrew Bonamour and his team. Bornamour will be Tiso Blackstar CEO. Adomakoh will become Chairman of Tiso Blackstar. Sowazi will serve as a non-executive director of Tiso Blackstar and become Chairman of Tiso Blackstar South Africa.

This is a promise of a new beginning for the two investment professionals who have ridden the BEE wave. Tiso (TIH) was established in 2001 and lived through the Tiso Group, a BBBEE styled investment vehicle. The broad based angle was facilitated via the Tiso Foundation which held about 18% of Tiso Group. The group supported by a number of financial institutions; Standard Bank, Investec, Rand Merchant Bank and Liberty Group; who were reported to be holding about 27% of the group in the pre-2011 era. Tiso was always controlled by management and mainly its founders.

At establishment and throughout the development stages, Tiso was synonymous to a trio made of founders; Fani Titi, Adomakoh and Sowazi. They led the group to participate in some of the most prominent BEE deals of the 2000’s. These include BEE deals concluded by Aveng, Investec, AECI, Iscor/Exxaro, Idwala and Emira Property Fund.

There was an apparent clash which led to the departure of Titi in 2008. In 2011 Tiso merged Kagiso Trust Holdings (KTH). Interestingly, both Titi and Sowazi worked for KTH before deciding to launch their own operation. KTH was established in 1993, under the leadership of Eric Molobi, to serve as endowment base for development NGO Kagiso Trust.

The 2011 merger created an entity called Kagiso Tiso Holdings (KTH) which now boasts a net asset value of about R10bn. Kagiso Trust alongside the Tiso Foundation held the lion’s share in KTH. This left TIH, the entity held by Adomakoh and Sowazi with 22%. This is the stake which is now is standing to be moved into Blackstar and exposing the riches of Sowazi and Adomakoh. Assuming they each hold 50% of TIH, this will translate to each controlling assets valued at about R1bn.

The question is: Will Blackstar fit into the KTH culture.

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