Thursday, July 25, 2024
NewsBGI Ethiopia, Purpose Black property deal saga takes turn to courtroom

BGI Ethiopia, Purpose Black property deal saga takes turn to courtroom

High court orders injunction on BGI property, 1.5 billion birr in accounts

Three judges at the Federal High Court have ordered an injunction on BGI Ethiopia’s Addis Ababa headquarters and 1.5 billion birr in its bank accounts as the brewer’s property deal with Purpose Black devolves into a legal wrangling.

Eight months ago, BGI Ethiopia agreed to sell its 30,000 square meter property near Mexico Square in the heart of the capital to Purpose Black, a relatively new business initiated by Fisseha Eshetu (PhD), for a reported five billion birr, excluding VAT. 

Last week, the brewer announced it had terminated the agreement, alleging that Purpose Black had failed to service payment installations on time and accusing it of deliberate attempts to prolong the sale process. BGI also announced it wants to find another buyer for the property.

“The sale will continue, but BGI will float a bid to find another buyer,” said Nega Miherete, legal and corporate affairs director at BGI Ethiopia.

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Purpose Black was quick to respond, with its legal representatives claiming the company had already paid 1.15 billion birr for the property and is willing to make the 2.5 billion birr payment expected of it in the second round. The company’s attorneys blamed BGI for failing to present clearance papers before scrapping the deal.

They maintain the sales agreement included clauses that oblige BGI to provide proof of exemption from capital gains tax and debt restrictions before the second installment was paid.

The attorneys blasted BGI for “a lack of willingness to adhere to the agreed-upon terms” and claim it has led to significant financial losses and contractual disputes.

The attorneys took it one step further and filed a petition with the Federal High Court for an injunction on March 6, 2024.

“[Purpose Black] is concerned that BGI will sell the property to another buyer and may also withdraw the 1.15 billion birr already paid by Purpose Black. Therefore, until [Purpose Black] files a claim in court, we request the court order a freeze on the property and the sum of money.”

Judges granted the request and have also ordered National Bank of Ethiopia (NBE) to instruct commercial banks and microfinance institutions to take measures to prevent BGI from moving a total of 1.5 billion birr from its accounts.

Purpose Black claims to have utilized funds since BGI’s initial non-payment, accruing legal interest amounting to 69 million Birr. Miscellaneous expenses and arbitration costs bring the disputed amount to over 1.5 billion birr.

Purpose Black’s attorneys requested the injunction to last nearly three weeks, citing time needed to prepare a legal case as well as for Fisseha’s return from travels abroad.

The injunction is to remain in place until March 26, 2024.

BGI executives confirmed the court injunction, but declined to provide additional details to The Reporter.

“We cannot comment on matters in legal proceedings,” an executive said.

However, the brewer has issued a statement acknowledging the dispute, citing lengthy negotiations spanning over eight months since the initial agreement in June 2023. BGI attributes the delays to numerous requests for contract amendments, including clauses related to devaluation and capital gains tax clearance.

BGI asserts that it has consistently urged Purpose Black to finalize negotiations and sign the proposed sales contract. The completion of the sales contract is essential for BGI to obtain tax clearance, which is a requirement enforced by tax authorities.

According to BGI, Purpose Black’s alleged lack of commitment and attempts to delay the sale process were evident when it demanded the re-signing of a previously signed lease contract as a condition for signing the sales contract. BGI and its attorneys interpret this as a deliberate attempt to prolong the process.

Furthermore, BGI claims that Purpose Black failed to provide evidence of sufficient financing for the transaction, despite assurances made during the initial stages of negotiation.

The legal dispute comes in the midst of a restructuring in BGI Ethiopia under new CEO Herve Milhade, who was appointed to the helm at the end of 2022. The brewer has plans to move its base of operations to a brewery in Sebeta, on the outskirts of the capital, following its recent acquisition of the Meta Abo Brewery from Diageo.

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