The battle for LonZim, the Aim-listed company that claims to be "playing an integral role in the revival of Zimbabwe", has turned nasty with the introduction of legal action.
The LonZim board has issued a writ for alleged defamation against a director of Johannesburg-based activist shareholder AMB Capital. Mishcon de Reya, the City law firm, is acting for LonZim.
AMB, which owns more than 20 per cent of LonZim, called last month for an extraordinary general meeting this summer at which it will look for support to replace the current board and break up the company. Asset sales would mean that cash would be returned to shareholders by the end of next year.
The LonZim board has rejected AMB's arguments, stating in a letter to investors: "To close LonZim abandons Zimbabwe and its people at the worst possible time." The letter added that divestment now would be "badly timed" given the worldwide crisis.
The EGM will see AMB pitched against Lonrho, the conglomerate once run by the late Roland "Tiny" Rowland. Lonrho spun-off LonZim in 2007, but still has a near 25 per cent stake and manages the group. David Lenigas and Geoffrey White are, respectively, chairman and chief executive at both companies.
AMB is supported by fellow investor Damille Partners IV, which has a stake of more than 6 per cent.
The LonZim board has applied for the writ through the High Court in England, though South Africa-based AMB director Andrew Sprague will not be formally served for a few weeks. The writ relates to comments Mr Sprague made to a South African business publication about the company's direction, as well as alleged conversations with other shareholders. Mr Sprague is one of the candidates that AMB has put up to replace the existing LonZim board.
Mr Lenigas said: "Mishcon de Reya has served papers for defamation, libel and loss of earnings."
An AMB spokesman said that the hedge fund was aware that the writ had been filed, but was awaiting details of the allegations. Mr Sprague could not be reached for comment, but is believed to have appointed lawyers. He has previously warned that the battle over LonZim was a "potentially hostile affair".
The company has pledged to invest in a range of Zimbabwean sectors including infrastructure, property and natural resources. LonZim shares closed at 30.75p on Friday, up 6 per cent on the start of trading, valuing it at £10.6m.Reuse content