Labat’s announcement that it is selling off its cannabis interests to shelf company 64P Investments for R23 million has raised more questions than answers.
Firstly, the deal has been shrouded in secrecy, with Labat revealing only that the buyer is not a ‘related party’ and that the ultimate beneficial owner behind P64 is one Hymie Pedro, a figure completely unknown in the cannabis industry. Pedro’s background is in the provision of metered services and he is a director of a company called Hefcom and keeps a low social media profile.
P64 Investments is also an unknown entity. What is accessible publicly is that its SARS tax returns for the past two years are outstanding.
Secondly, the deal as disclosed, does not make commercial sense for the buyer under the terms and conditions that have been made public.
Furthermore, there is a question mark over how ‘unrelated’ Pedro is to Labat. This is significant in that the company has to get general shareholder approval if the deal involves a ‘related’ party but the board has the discretion to sign off on the sale of assets if it’s to an ‘unrelated party’. In other words, if it’s shown that the Labat and P64 have no relationship, shareholders will have no say in the deal.
Hymie Who?
So who is Hymie Pedro? A quick ask around cannabis industry players elicited the response: “Hymie Who?”, but a bit of googling dug up an ancient connection between Labat director Brian van Rooyen and Hymie Pedro.
Hymie Pedro may not be a related party to the Labat deal now, but he had close ties to van Rooyen 20 years ago when they were sole directors of a company called Friedshelf 477 Investments, according to a report at the time in Finweek by Deon Basson.
Those were the days when van Rooyen was borrowing money from Marcus Jooste on behalf of the SA Rugby Union of which he was chairman at the time. He was also a non-executive director at Labat, then a JSE-listed logistics and biofuel business, and a good 12 years before the group transitioned into becoming a ‘first-mover-advantage’ cannabis company.
Nonetheless, Labat shareholders may have a sense of déjà vu reading Basson’s news report of 5 November 2005 which detailed how van Rooyen was back then fighting to survive after the JSE had suspended the company’s listing due to late financial reporting.
“In the meantime, Labat is choking, and minorities are suffering due to van Rooyen’s poor corporate governance” wrote Basson all those years ago.
Shareholders may also have a sense of déjà vu from the same Finweek article which says that Friedshelf 477 had a 47% investment in Fluxrab Investments 111 in which the Labat share trust held six percent. Fluxrab was going to buy Labat’s retail division of Acme stores but it’s unclear whether the sale actually went through.
Fast forward 20 years and one has to question how ‘arms-length’ the Labat cannabis asset sale to P64 Investments is, given this background.
Pedro clearly had a business relationship with van Rooyen back in the day. That is not to say he still has one.
The point is that Van Rooyen remains a director of Labat even though he is no longer chairman. If either he, his son Stanton, or Cannafrica head Herschel Maasdorp depart Labat to follow the cannabis assets, the JSE might have to review the deal as an ‘unrelated’ transaction.
At this stage, details of the deal remain scanty, particularly what security P64 is putting up against the credit facility granted by Labat in which the R23 million purchase fee is to be paid off on a monthly basis on as-yet unspecified terms.
Why the Premium Price for High Risk Assets?
And why would P64 pay over four times the stated net asset value of Labat’s cannabis interests, which the seller has described as “high risk”?
This is a particularly pertinent question if one takes into account that a due diligence would have revealed there is not a single cannabis plant growing at Sweet Waters Aquaponics near Kenton-on-Sea in the Eastern Cape. In fact, Cannabiz Africa understands there is a dispute with a US company over extraction equipment supplied to Sweet Waters several years ago but never used and apparently not paid for.
Then there is also the risk associated with Cannafrica, which reportedly has between 50 and 70 stores nationwide, operating in the cannabis retail ‘Grey Zone’. As retail cannabis sales are illegal, Cannafrica provides cannabis to consumers through a ‘research’ window, a model as yet untested in court.
Although the market anticipated Labat’s sale of cannabis interests, it did not expect the dramatic turnaround to profitability as announced in a trading update on 23 October 2025. Although its financials are still pending (they are due by 31 October 2025 or the share will once again be suspended), the update anticipates a 267% increase in headline earnings a share. Labat says the strong performance is a result of the acquisitions it has made in the IT space.
While Labat’s future looks a lot clearer with cannabis unbundled, the same cannot be said for what lies ahead for P64 Investments which is buying the assets. As a private company it will not be subject to the same scrutiny as Labat was, although the regulatory and compliance challenges of the cannabis business will not go away any time soon.
The irony for Labat shareholders, many of whom bought in on the promise of cannabis riches, is that they are probably better off as shareholders of a non-cannabis company. That is a sad reflection on the state of the fledgling South African cannabis economy.
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