Legal Battle Continues: Former Dimension Data Executives Granted Leave to Appeal in Property Sale Dispute

The Johannesburg legal landscape witnessed a significant development as former executives of Dimension Data, now part of NTT Ltd, were granted leave to appeal a previous court decision concerning the contentious sale of the Campus property. This marks a pivotal moment in a complex case intertwining corporate restructuring, empowerment policies, and high-stakes legal maneuvering.

The dispute initially unfolded when NTT, a global technology services provider, decided to divest its African business, proposing the sale to a group of its executives, including Jeremy Ord, a founder of Dimension Data. This move was seen as an opportunity to reinvest and revitalize the South African IT firm, which had been grappling with a suboptimal Broad-Based Black Economic Empowerment (BEE) rating affecting its market valuation.

In a strategic shift to enhance the BEE score, NTT pivoted from a direct sale of shares to black investors to orchestrating a sale-and-leaseback deal involving the Bryanston-based Campus head office. The property was sold to Identity Property Co., a subsidiary of BEE-focused fund manager Identity Partners. This arrangement was aimed at achieving desirable BEE outcomes without financial drawbacks typically associated with equity sales at discounted rates.

The saga took a contentious turn when, after internal agreements and the establishment of the Identity Fund I to manage the Campus asset, NTT decided to retract the management buy-out (MBO) arrangement in 2021. Subsequently, Dimension Data declared the deal ratified in January 2022, a claim NTT contested by declaring the transaction void in August 2022, leading to a legal challenge.

Judge Denise Fisher's initial ruling favored NTT, invalidating the sale. However, the decision to allow an appeal suggests that the appellate court will thoroughly re-examine aspects of the transaction and the compliance with BEE regulations, which could potentially alter the course of the case.

The former executives, represented by Areti Partnership and Identity Property Fund I among others, argue that the appeal will vindicate their position, emphasizing that their indirect participation through the fund was intended as part of the broader MBO strategy to enhance BEE credentials and ensure a smooth transition of ownership.

This legal confrontation not only highlights the complexities of corporate divestitures and empowerment strategies in South Africa but also underscores the challenges in balancing business strategies with socio-economic regulations aimed at transformation.

As the appeal process is set to unfold, the business community and legal observers will be closely watching how this case might influence future corporate divestiture strategies and the interpretation of empowerment policies in South Africa's dynamic market environment.