CYTECH CHRONOLOGY OF KEY EVENTS
Source: Information obtained during the investigation of Cytech by Nic Frangos.
Jade Hamburger (“Hamburger”), Tal Harpaz (“Harpaz”) and Sean Rose (“Rose”) met at
Wits and became close house friends. Martin Sacks (“Sacks”) was very much in the
circle, as was Evan Hoff (“Hoff”).
Hamburger and Hoff were articled at Price Waterhouse Coopers.
Martin Moshal (“Moshal”) (owner of Micro Gaming Systems) approached Hoff to join
him. Hoff left Price Waterhouse Coopers to join Moshal early in 1997. Hoff then
established V R Services in Cape Town. V R Services provided administration systems
for online casinos in 1997.
In 1997, Harpaz and Rose developed a business plan to enter the on-line casino market
and they were assisted by Hamburger. In May 1998, the plan was presented to
In July 1998, Sacks offered Hamburger a position in Corpcapital and Corpcapital decided
to invest in the e-gaming opportunity.
The Heads of Agreement were signed 29 July 1998. The Shareholders Agreement and
Sale Agreement were never signed.
Harpaz and Rose developed Global Administration in London.
In December 1998 Corpcapital concluded a Software License Agreement with MGS and
the online casino commenced operations.
Concept developed of a dedicated e-services group within Corpcapital. This activity was
outside of the mandate of the group and was not disclosed or approved by the board of
On 4 July a cash shell Absec, owned by Corpcapital, acquired 100% of Global Admin,
Interactive Online, Apshai and Aqua. Absec changed its name to Aqua Online.
Hamburger produces the first valuation of Netainment/Cytech at R3m, using a multiple
of 3 on the PE method.
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Hamburger produces second valuation of Netainment at US$ 5.7m (100%). PE of 7
used. Corpcapital share R17m.
Jeff Liebesman (“Liebesman”) and Hamburger meet with promoters, brokers and banks
for potential London listing.
Insinger pitches to list Cytech on AIM.
Rose initiates merger with English Harbour.
Hamburger is instructed by Exco to get an independent valuation of Cytech – Old
Corpcapital board decides not to proceed.
Aqua listing on AIM considered.
Congress fails to pass bill banning Internet gambling, but the writing is on the wall. The
market knows that it is now only a matter of time before the United States bans online
gambling for its citizens.
Hamburger instructed by Exco to have Cytech audited.
Fisher Hoffman Sithole and management decided against audit.
Hamburger and the executives decide to use the DCF method of valuation to replace the
earnings multiple method used previously. No communication on this matter takes place
with the audit committee the board of directors or shareholders. Instead the matter is
debated internally and discussed with Peter Kay of FHS.
Hamburger finalises indicative valuation at $44.8m (100%) using the DCF method.
Nic Frangos’ (“Frangos”) enquiry into Cytech commences as a result of a massive
increase in the profitability of Old Corpcapital.
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New Netainment /Cytech Shareholders’ Agreement (drafted not signed).
Due diligence of Cytech and English Harbour is concluded satisfactorily as a prelude to
the merging of the two entities. The merger is called off after English Harbour realize
that Corpcapital are bringing less to the merger and want more.
Rose and Harpaz paid themselves an unauthorized bonus.
PWC (London) mandated to sell Cytech.
Minister of Finance approves the 100% acquisition of Corpcapital Bank by Old
Corpcapital, and merger discussions commence.
KPMG are appointed by Corpgro to represent old Corpcapital in the merger. KPMG are
mandated to value old Corpcapital and to express an opinion on the merger swap ratios.
KPMG use management figures for Cytech which contain significant disclaimers and do
not conduct an independent valuation of Cytech.
Hoff hired as CEO for Cytech. This appointment does not last for long.
February six-month valuation finalized at $57.1m (100%).
KPMG reasonableness report on old Corpcapital contains disclaimers.
Hamburger and the executives value Cytech at $70m to determine executive options.
US banks reject online gaming transactions and prohibit the use of credit cards.
Corpcapital initiate discussions with IMS with the intention of replacing the MGS
software with lower cost IMS software.
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KPMG test updated Hamburger valuation, but still work on management figures.
Value determined at $55.4m (100%).
Corpcapital cancel the MGS software deal and replace software with IMS software.
Insufficient attention is paid to the differences in the quality of software and the
significant conversion issues for customers.
1 October – agreement concluded between IMS/Cytech on software license.
1 October – Aqua and Cytech enter a new administration services contract where the fee
charged by Aqua to Cytech is reduced. This has a detrimental effect on the bottom line
of Aqua. Boards of directors and shareholders are not consulted on the change.
1 October – Netainment sells its business to Cytech (excluding MGS contract) for shares
in Cytech. The reason for the change is to insulate Cytech from a lawsuit from MGS.
Rose and Harpaz paid themselves an unauthorized bonus.
15 December – Sale Agreement concluded between Mikado and Blue Eagle to ring-fence
Netainment for tax purposes.
22 February – first draft valuation $51.7m revised down to $40.7m (100%).
FHS presented final audited accounts for 36 months ending September 2001 (unsigned).
22 April – Frangos letter to Liebesman requiring information on Cytech.
8 May – Netainment sells businesses (excluding MGS License Agreement) to Cytech,
effective 1 October 2001.
6 May – meeting between Eric Ellerine (“Ellerine”), Liebesman and Frangos to discuss why
Cytech information is not forthcoming.
30 May – Frangos meets with Sacks and Hamburger, still insufficient information.
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4 June – Liebesman commences a series of aggressive letters to Frangos
29 June – Frangos summary of Cytech presented to Ellerine and Tom Wixley (“Wixley”).
Frangos requires independent valuation, and discussion with non-executive directors.
Hamburger discusses Cytech valuations with Wixley.
25 July – non-executive directors meet to discuss Cytech.
31 July – meeting of the Audit Committee to discuss year-end procedures.
Hamburger admits software migration in October 2001 proved to be a mistake – inferior
product to MGS.
Valuation $21.8m (100%).
2 August – Frangos letter to Wixley raising serious issues about Cytech, including over
valuation and questioning historic valuations.
August - PWC appointed to conduct an independent audit of Cytech.
Hamburger instructed by Benji Liebmann to prepare detailed submission for Saxon meeting.
The purpose of the report is to change the agenda.
10 October – PWC issue their report on the valuation of Cytech.
16 October – Special Audit Committee Meeting to approve PWC valuation.
25 October – Informal meeting of Corpcapital Directors at the Saxon Hotel to discuss
Cytech, and the pattern of behaviour of executives.
2 December 2002 - Frangos letter of resignation
15 January - Corpcapital AGM. Shareholders enquire into Cytech valuations. Chairman,
Ellerine does not answer the questions put to him, and material information is withheld
17 January – publication of Frangos’ letter of resignation.
19 January – board of directors of Corpcapital issue press statement in response to
Frangos letter of resignation.
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January – Nigel Payne appointed by Corpcapital to resolve the differences between
Frangos’ letter of resignation and Corpcapital’s press statement.
17 February – Payne report published at Corpcapital premises, and gives Corpcapital a
clean bill of health. Frangos rejects the report.
28 February – Corpcapital announce a new strategy, which eventually leads to the total
dismantling of the company.
Corpcapital announce interim results for the six month to 28 February 2003. The value
of Cytech is reduced from R110 million to R65 million.
14 August – Liebesman resigns.
Corpcapital announce financial results for the year to 31 August 2003. Cytech reduced in
value from R65 million to R20 million.
Shareholder controversy over Cytech continues at the Annual General Meeting to
approve the annual financial statements for the year to 31 August 2003.
Cytech no longer mentioned in the annual financial statements.
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