How Andrew Bonamour and his audacious mentor Julian Treger stripped nearly R300 million from the Blackstar coffers.
Andrew Bonamour, South Africa’s newest press baron and unlikely lord of iconic titles such as The Sunday Times, Business Day, Sowetan and Financial Mail, established an offshore company in the British Virgin Islands and paid himself more than £7.5m (then around R100m) in fees through a sweetheart deal with his own Blackstar group.
|Julian Treger's Plettenberg Bay pad|
And Julian Treger, then a Blackstar director, and once the most feared corporate assassin in the City of London, received performance fees of £809,000 under the deal, for his interest in the offshore company. In all, Noseweek can reveal, the duo profited by as much as £21m (then around R295m) from Blackstar Managers (British Virgin Islands reg no 629747).
Tiso Blackstar Group has a dual listing on the London and Johannesburg Stock Exchanges. This July it was elevated from the junior AltX market of the JSE to the main board. In London the group is listed on the AIM secondary market and is planning to seek promotion to the LSE’s main board.
Andrew Bonamour and Julian Treger received their bonanzas over four years from Blackstar Investors Plc, as the group was then called. They devised the scheme in Johannesburg before Blackstar listed on the notoriously lax Alternative Investment Market of the London Stock Exchange in 2006, and the bizarre arrangement only ended when the Blackstar board feared it would face scrutiny by the Johannesburg Stock Exchange, where Blackstar was planning to apply for a secondary listing.
|Nouveau press baron Andrew Bonamour|
To bury the whole thing the Blackstar board – which included Bonamour as a driving force and Julian Treger as a director and founding chairman – paid out a further £14.9m to absorb Bonamour’s offshore company into the group. Of this additional £14.9m windfall, Bonamour family trusts received £8.6m, the bulk of which went on buying him 10,214,356 newly-issued Blackstar shares. The share purchase left Bonamour holding 20.5% of Blackstar’s stock, making him the group’s then largest single shareholder. The hasty buyout also paid an additional £3.5m to Julian Treger.
The story of Blackstar’s birth begins in Johannesburg, where Julian Treger and Brian Myerson had turned up in 2001. A pair of South Africans, they were based in London, where they had established a reputation for hit-and-run asset-stripping. Now they had decided to try their special brand of shareholder activism on non-performing SA-listed companies.
UK victims of their Active Value Advisors investment company included famous if fading names such as department store Liberty, glassmakers Pilkington and upmarket store Aquascutum. The Treger-Myerson style was to invest client funds in undervalued listed companies, where they would demand CEO resignations, management sackings and generally shake up stuck-in-the-mud boardrooms. All in the name of restructuring to unlock value for their well-heeled clients, on whose behalf they managed more than $900m over the years.
Treger explained their take-no-prisoners style to the Daily Telegraph. “You have to have had kills, you need to take people down. Barking is not good enough. Whenever you entered into a fray with management you just could not be bested by them, or you would start to be seen as a toothless lion.”
This fighting talk was music to the ears of young Andrew Bonamour, who after Kloof high school and a BCom at Unisa, had cut his teeth in investment banking, leveraged buyouts and restructurings at Rand Merchant Bank and Brait SA. By 2003, aged 32, he was soaking up the Treger-Myerson philosophy as chief investment officer at their Joburg entry vehicle Avasa.
By 2005 Avasa had morphed into Purple Capital, a JSE-listed investment group whose chairman was the highly-regarded former merchant banker Mark Barnes (these days seconded from Purple to sort out the ailing South African Post Office).
Purple’s founding directors included Andrew Bonamour as CEO and Julian Treger, the latter commuting between Joburg and London. Within months of Purple opening its doors Barnes was telling everyone about plans to raise and manage the $250m Blackstar Equity Fund, which would provide funding for black empowerment deals. A company called Blackstar Investors Plc, he said, was in the process of listing on the AIM market of the London Stock Exchange and an independently-operated company called Blackstar Managers (owned 50.1% by Bonamour and 49.1% by Purple) would invest the Plc’s funds in South Africa, for which Purple would receive a performance fee.
However, it came to naught for Purple Capital. Within months of opening its doors Bonamour had submitted his resignation and cleared his desk. Treger followed suit eight months later.
Barnes tells Noseweek: “Andrew was this bushy-tailed bright young guy who worked with us at Purple. I’ve discovered in my growing up that I’m not a private-equity guy, I don’t like walking in there and trying to extract value. I like building things, not extracting whatever value I can immediately out of them. Andrew wanted to carry on with that dream, so off he went into the distance with Julian, his new partner.”
|Former corporate assassin Julian Treger|
Of Julian Treger, Barnes says: “It turned out we didn’t see eye to eye on a lot of investment criteria or ways of going about business. It became fairly clear to me early in the relationship that we weren’t looking for the same things in business or life, and we parted ways.
“What they did in London I wasn’t really privy to. I wasn’t involved in that listing on the AIM. I’ll say this about the difference between us: when asset-strippers walk past a field and see a cow and a bull, they see meat. I see a potential herd.”
(In December 2007 Purple Capital sold its entire interest in Blackstar Managers to Bonamour for R5.5m).
To launch the Blackstar Group that we know today on London’s Alternative Investment Market, Treger mobilised a shell company, Illuminator Plc, which he and Brian Myerson had used in 2000 in an abortive attempt to raise up to £100m and snap up distressed European dot.com companies. However the tech boom was on the wane and it never happened. But dormant Illuminator had an AIM listing, so only its shareholders’ consent was required to switch the investment strategy from dot.com in Europe to BEE in South Africa, raise some capital, change the name to Blackstar Investors Plc and relocate the place of business to Luxembourg for tax purposes.
A letter to shareholders at the end of 2005 also served as the official admission document requesting London Stock Exchange approval for Illuminator’s readmission to the AIM. This 55-page document was provided by an “independent” Illuminator director named David Brock, who wrote that the new Blackstar Investors Plc proposed to engage the services of an offshore management company called Blackstar Managers, headed by Andrew Bonamour “who has a successful track record of investment in South Africa”. For this Bonamour would be paid a salary of £15,000 pa.
Brock assured shareholders and the AIM: “The role between the parties is strictly one of independent contractor and client.” He added that Bonamour would be joining the board of the new Plc immediately after the placing.
In a note under “related parties” Treger, as a director and chairman-to-be of the new Plc, declared an interest in Blackstar Managers, with entitlement to a share in any performance fee payable under an Investment Advisory Agreement. And Bonamour declared that in addition to being a proposed director of the new Plc he was a beneficiary of family trusts who owned Blackstar Managers. So the duo made no secret of their intentions.
However, what they didn’t disclose was their previous relationship as co-directors of Purple Capital in Joburg. Or, most importantly, that they had planned and executed the entire Blackstar operation and the “independent” offshore spin-off together, from the start.
On 27 January 2006 the old Illuminator shareholders gave their approval to the proposals and Treger’s stockbrokers, Shore Capital, raised £35m in a placing of new Blackstar shares with their international clients, who included such big-name institutions as Merrill Lynch, Bear Stearns, Kleinwort Benson and Fidelity.
Days after Blackstar Investors Plc opened for business that March the first investment was announced – £6.3m in Eurosteel, supplier of stainless steel to South Africa. Bonamour enthused to the board about the abundance of BEE opportunities, so that in August another placing by Shore Capital gave Bonamour a further £45m to play with. Thus did Blackstar Investors Plc – tiny, unknown, but very well connected thanks to Julian Treger – rake in a start-up kitty of £80m. A billion rands!
In that first year, 2006, Bonamour’s Blackstar Managers committed £54m for investments across a range of sectors. By the end of the following year stakes had been bought in York Timber (£16.8m), Mvelaphanda Resources (£12.4m) and DCD-Dorbyl (£4.9m). A tactful £3.7m was pumped into Myriad Medical, headed by President Mandela’s daughter Dr Maki Mandela.
And to Bonamour’s little offshore enterprise the fees came rolling in from his own Blackstar Investors Plc.Investment advisory fees totalling £5.3m all went to Andrew Bonamour, aka Blackstar Managers.
The accounts show performance fees (20% of the increase in value of the investments) due to Blackstar Managers, totalling £5.7m. Of the £3.4m actually paid out, Bonamour’s 66.5% share was £2.3m; Treger’s 23.5% came to £809,810. This as the global recession bit, and in 2008 and 2009 the embryo Blackstar Investors Plc reported pre-tax losses of £7.8m and £5.4m.
Ten per cent of the performance fees – nearly £344,000 – went to Shore Capital Trading, the London group that as well as being Blackstar’s placing stockbroker was their nomad (nominated adviser), charged by the London Stock Exchange under AIM rules to “police” the new listing.
The investment advisory fee, 2006 to 2009, totalling another £5.2m, went to Andrew Bonamour aka Blackstar Managers.
However, there was some disquiet about this discreet sideline. Blackstar’s 2008 annual report starts off with an announcement by the “Investment Adviser” (Andrew Bonamour): “Blackstar’s board of directors [including him] has started discussions with its investment adviser Blackstar Managers Ltd [that’s him too] to consider whether to change the company [Blackstar Managers] from an externally advised company to an internally managed holding company.”
A bare couple of months later an unsigned communication from “the board” informed shareholders that the Investor Advisory Agreement (IAA) with Blackstar Managers was being terminated.
The circular quotes extracts from a letter Blackstar’s non-executive chairman John Mills had sent to shareholders giving reasons for the decision: the group was planning a secondary listing on the Johannesburg Stock Exchange and the JSE “does not have many externally-managed companies listed on the exchange”. Indeed, wrote Mills, the local exchange was “not in favour of externally managed companies”. (Blackstar was admitted to the JSE’s AltX market on 12 August 2011.)
Mills was a lawyer who acted as director for a number of Luxembourg investment funds. In what appears to be a direct swipe at Bonamour and Julian Treger, Mills said that bringing Blackstar Managers “into the group fold” would enable the enlarged group “to retain cash that would otherwise have been payable to Blackstar Managers”. The internalisation, said Mills, would provide an annual saving of around 50% of the advisory fee (a fee that was running at around £1m a year). It would also remove “the uncertain impact of the performance fees, which have the potential to be very substantial over the life of the IAA”.
The “internalisation” would cost £14.9m. Of this, company documents reveal, £8.6m went to Blackstar Managers (£6.8m of it to buy 10,214,356 new Blackstar Group shares for Bonamour and £1.8m for finance house Westmount to pay off the balance of a £3m loan made to Bonamour the previous year for an earlier Blackstar share purchase).
For Julian Treger’s interest in the performance fees his Novatrust, on behalf of the Treger Family Settlement, got £3.5m, of which £2.1m went on acquiring 3,127,495 new Blackstar shares for Treger, leaving him with 5.68% of the company. (Treger resigned and quit the group 11 months later.)
The payout also gave £2.8m to BFM, Blackstar Managers’ subsidiary in Johannesburg (44.94% owned by Bonamour through his Aimeth Trust). That 44.94% was £1.2m – a handy R15m or so, all in cash, for Bonamour – which brought our offshore hero’s total from the group he headed to £17.3m. Add in Treger’s £4.3m and that’s £21.6m (around R295m scooped by the duo).
The BFM staff of four investment professionals and two support staff in Johannesburg, plus Bonamour (who drew an additional R2.65m annual salary as the subsidiary’s chairman and chief executive) would all become employees of the enlarged Blackstar Group. Where, of course, Bonamour would retain the R2.65m salary to add to his (undisclosed at the time) remuneration package as kingpin of the whole group.
Tiso Blackstar has lead a muddled corporate existence. In its 11 years the group’s registered office and/or tax residence has flitted between London, Luxembourg and Malta. There’s the Gibraltar subsidiary that acts as the company’s treasury vehicle and the Cyprus subsidiary that shares in SA investment opportunities. As for Blackstar Managers, the “independent” money-spinner that Bonamour set up in the distant British Virgin Islands, its official address is given as 12 Rue du Puits-Godet, Neuchâtel, Switzerland. And the group’s very name has swung from Blackstar Investors Plc to Blackstar Group Plc and finally Tiso Blackstar Group.
Noseweek sent a number of questions to 54-year-old Julian Treger at Audley Capital, his investment fund these days. They included: “Did you fall out with Mark Barnes over Blackstar’s false start at Purple Capital?” and “When Blackstar was formed, why wasn’t your previous association with Andrew Bonamour declared in Illuminator’s admission document to the AIM?” Alas, after 11 years, amnesia has set in. “I can’t recall the details as it was over a decade below (sic),” replies Treger, a relaxed man with a droll sense of humour. “I certainly had no falling out with Mark Barnes.”
Does he still own shares in Tiso Blackstar Group and is he in contact with Andrew Bonamour? “I don’t own a stake in Blackstar, but I am in contact with Andrew.”
These days, with 100% ownership of Times Media Group and its illustrious titles in the bag, CEO Andrew Bonamour, 46-year-old press baron, has been busy selling off R1.9bn worth of Tiso Blackstar’s non-core assets (property, industrial, retail etc), earmarked for disposal in the latest restructuring to transform Blackstar into a single sector Sub-Saharan media giant.
New share issues have diluted Bonamour’s once 20.5% Blackstar stake down to 3.3% – but that’s worth around R83m. And last year the father of two, who relaxes with trout-fishing and with breeding Nguni cattle on his Mulberry Hill estate outside Dullstroom, scooped a R1m cash bonus under the group’s Management Incentive Scheme, on top of his R2.65m remuneration package.
The oldboy relationship soured
In his matric year at King David High School Linksfield, young Julian Treger was chairman of the Stock Exchange Game, an inter-school competition between entrepreneurial-minded students who wheeled and dealed with fictitious money on the Johannesburg bourse to see who could make the most profit.Treger’s three enterprises sank without trace. “I wish next year’s team better fortune,” he wrote wryly in the school magazine.
Elliot Wolf, former headmaster of the Jewish day school, has vivid memories of the corporate raider-to-be as a “very brilliant boy, one of the top academic achievers of his year; not a sportsman at all”.
Treger’s family left Lithuania in the 19th century for Zimbabwe, where they founded a manufacturing company in Bulawayo, turning out grain bags, plastics, and aluminium doors and windows. After a BA (magna cum laude) at Harvard University and an MBA at Harvard Business School, Johannesburg-born Treger joined J Rothschild, where he managed a portfolio of public and private equity investments, followed by a spell at Hambros learning about restructuring and refinancing. In 1992, 13 years after his disaster in the Stock Exchange Game at King David, he joined up with another of the school’s old boys, Brian Myerson, and they launched their infamous Active Value Advisors in London.
They share the same birthday – October 22 – but Myerson was four years older and they never met at school. Former headmaster Wolf remembers Myerson as “a good sportsman and very much a socialite, popular with the girls and that sort of thing, but nowhere near as intelligent as Julian”.
|Julian Treger's 19th century London townhouse|
For 12 years Treger and Myerson unleashed their ferocious brand of shareholder activism in the City of London, collecting substantial wealth for themselves along the way. The Treger family home in London is a fabulous listed 19th-century gem, with high ceilings, ornate mouldings and herringbone wood floors. Back home there’s a three-storey “cottage” on 22 hectares outside Plettenberg Bay. The off-the-grid ocean-side retreat, referred to by locals as the spaceship, houses local art by Erik Laubscher, Douglas Portway and Cecil Skotnes, sculpture by the likes of Edoardo Villa and design gems such as a Tom Dixon metal pylon and glass-top dinner table from 1993.
For Brian Myerson, who met his sculptress wife Ingrid when he was studying law at Wits and she was completing an arts degree, there was a £7m townhouse in Hampstead, a country estate in Hampshire, a luxurious beach house at Plettenberg Bay, and not to forget, the nearby Bitou House polo estate, where Myerson would arrive by helicopter for a chukka on the laser-levelled polo fields.
But the relationship between the King David oldboys soured after they lost £30m in a failed attempt to prevent the board of debt-laden ad group Cordiant, in which they had a speculative 29% stake, from selling out to advertising giant WPP. So the 12-year Active Value partnership ended, leaving the younger, probably brighter Andrew Bonamour to take Myerson’s place in Treger’s game plans.
Myerson set up on his own as Principle Capital, but his 26-year marriage collapsed when Ingrid discovered that for years he had been leading a double life. Around the corner in Hampstead he had bought a house for his mistress Clare Denley and their young son, who he would visit daily from 5pm to 7pm. When the Myersons and their three children went on holiday to Plett, Denley and son would secretly tag along and stay in a rented villa.
In their 2008 divorce Myerson was ordered to pay Ingrid £11m – almost half his £25.8m estate. Ingrid’s portion was to be in houses and cash, leaving Myerson mainly with shares in his Principle Capital, which promptly plunged in value from £1.50 to 20p.
The following year the Takeover Panel banned Myerson from the City for three years in a rare “cold shoulder” order, for acting in a secret investment concert party with two others over shares in Principle, giving “disingenuous and dishonest” explanations in an atttempt to cover it up.
Things went better for Treger at Blackstar. In November 2010, a bare six months after he resigned from the group, he hit the jackpot with Western Coal. His hedge fund Audley Capital had invested $25m for a 23.5% stake in the Canadian AIM-registered company. Treger joined the Western board and agitated as usual for change and turnaround, which paid off in 2010 when the company was bought by American coal producer Walter Energy for $3.3bn. The deal made $400m for Treger and his investors.
By last year Brian Myerson had retreated to a R185m property (“owned” by his attorney) at Fresnaye on the Cape’s Atlantic seaboard. Eleven months ago the Western Cape High Court ordered the discredited financier to pay Ingrid the R7m still owed to her on the London divorce settlement.
Any hopes by 58-year-old Myerson that his long association with Julian Treger would yield mercy from Andrew Bonamour were dashed when Blackstar’s flagship The Sunday Times gleefully ran a story last December rubbing in the outstanding divorce debt. In April this year The Sunday Times reprised with revelations that Myerson had only paid Flavio Porceddu, his butler for 12 years, R35,000 of a R175,000 CCMA settlement after he was summarily fired. His butler’s duties, Porceddu confided, included such chores as waiting to collect the boss at 4 am from Mavericks stripclub.
This June Julian Treger, now 54, lost his new partner at Audley Capital, 69-year-old Michael Treichl, who was found dead in Lake Geneva. Suicide by drowning was the police theory. Treichl’s family said he had been suffering from depression, exacerbated by a mysterious fire that two months earlier, in the early hours of Easter Saturday had gutted the family home, a 500-year-old listed mansion in Dorset.
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