Revealed: Karauri stake in SportPesa-linked firm

Sportpesa CEO Ronald Karauri. FILE PHOTO | NMG

By VICTOR JUMA
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Summary

• Records at the Registrar of Companies show that Mr Karauri recently acquired an effective stake of 54.4 percent in Milestone through a series of investment vehicles.
• The bid to bring back SportPesa through Milestone, if it had succeeded, would have left his partners in Pevans East Africa -- which operated the gaming brand until July last year -- with a shell company.
• Mr Karauri owns a seven percent stake in Pevans, which is engulfed in a bitter shareholder fallout over allegations of transfer of $278 million (Sh29.1 billion) from the company’s coffers to overseas accounts and sale of shares in the firm’s holding company.

SportPesa chief executive Ronald Karauri is a major shareholder of Milestone Games Limited, the company behind the recent controversial and short-lived attempt to revive the popular gaming brand in the Kenyan market.

Records at the Registrar of Companies show that Mr Karauri recently acquired an effective stake of 54.4 percent in Milestone through a series of investment vehicles.

The bid to bring back SportPesa through Milestone, if it had succeeded, would have left his partners in Pevans East Africa -- which operated the gaming brand until July last year -- with a shell company.

Mr Karauri owns a seven percent stake in Pevans, which is engulfed in a bitter shareholder fallout over allegations of transfer of $278 million (Sh29.1 billion) from the company’s coffers to overseas accounts and sale of shares in the firm’s holding company.

Records show that Mr Karauri was joined in the new betting firm by Francis Waweru Kiarie, who has acquired an effective 40.9 percent stake in Milestone. Mr Kiarie also owns a one percent stake in Pevans.

With Pevans’ licence frozen over an unpaid tax bill of Sh15.1 billion, Milestone’s owners applied to the Betting Control and Licensing Board (BCLB) to operate the SportPesa brand in what would have given them access to a database of more than 12 million customers and valuable domains.

The move would have also seen them avoid paying the taxes demanded on SportPesa operations under Pevans.

The approval was granted, and Mr Karauri last Friday took to social media to declare the return of the SportPesa brand “under a new BCLB licence holder.”

The announcement was instantly greeted with enthusiasm on online forums and hundreds of bets were placed before the regulator clamped down on the operation within hours.

BCLB says Milestone’s authorisation to operate under the SportPesa brand was an error.

“We note that Milestone Games Limited has been authorised to use the trademark SportPesa by M/s SportPesa Global Holdings Limited whereas during the 2020/2021 financial year renewal application the board authorised the use of trading name Milestone Bet to yourselves,” the regulator wrote to Milestone.

“According to information in our possession, the trade name SportPesa belongs to M/s Pevans East Africa Limited.”

Mr Karauri and Mr Kiarie own Milestone through a chain of two investment vehicles--- Selenium Limited and NOB Five Limited.

Mr Karauri owns a 57.1 percent stake in Selenium Limited that has a 96 percent interest in NOB Five, which in turn holds a 99.5 percent equity in Milestone.

He is listed as a director and shareholder of Selenium.

Mr Kiarie on the other hand has a 42.8 percent stake in Selenium, leading up to an effective interest of 40.9 percent interest in Milestone.

According to the records, Milestone’s two direct shareholders and directors are NOB Five and little-known Wilson Ngatia Karungaru, who has a 0.5 percent ownership in the gaming firm.

Businessman Paul Wanderi Ndung’u, who owns a 17 percent stake in Pevans, said he was shocked to learn of efforts to revive SportPesa.

He revealed for the first time that there was a shareholder war among the founders of the popular gaming brand who own shares in both Pevans and SportPesa Global (which owns the gaming businesses outside Kenya).

“That just like the rest of the Kenyan public, I came to learn of the resumption of SportPesa business through the social media at 9 p.m. on Friday,” he said in an earlier statement.

“That the company Milestone Games Limited, its shareholding ownership whether through proxies, trustees or otherwise is unknown to me.”

He claimed that Milestone was attempting to run away with SportPesa brand, customers and gaming infrastructure built over the years.

Mr Ndung’u also alleged that Mr Karauri had teamed up with the foreign investors in Pevans and Sportpesa Global to sideline other Kenyan shareholders, dilute their stakes and wire Sh29.1 billion out of the country.

Top shareholders of Pevans were excluded from buying additional shares in SportPesa Global, resulting in their dilution in the UK-based firm, he said.

Mr Karauri’s moves reveal major intrigues in the lucrative betting industry, which has attracted an increasingly larger group of wealthy and well-connected investors.

It is not clear how or when Mr Karauri and Mr Kiarie took control of Milestone, which was previously owned 50 percent by James Muigai Ngengi.

Mr Ngengi is a nephew of President Uhuru Kenyatta.

Peter Kihanya Muiruri, a cousin of the President, also recently emerged with a one percent stake in Pevans and a 0.5 percent equity in Sportpesa Global.

Mr Karauri is now at the centre of Sportpesa’s local and global operations after Mr Ndung’u and other Kenyan shareholders fell out with their American and Bulgarian counterparts.

The boards of the international subsidiaries were restructured in April and Mr Ndung’u was among the directors removed, according to correspondence seen by the Business Daily.

Sportpesa Global’s new board, for instance, was slimmed down and now consists of directors Adam Beighton, Kalina Karadzhova and Mr Karauri.

The changes were made ostensibly to give the companies agility and enable them to make quick decisions during this Covid-19 pandemic, drawing protests from Mr Ndung’u.

“I am not sure this is a 1st April Fool’s day notice joke,” Mr Ndung’u wrote to Mr Beighton who organised the board changes.

“It’s a sham and shame that today’s board meeting, whose notice is four and half hours the main agenda is to remove Kenyan directors –specifically Paul Wanderi Ndung’u due to effects of Covdi-19 so be it.”