- February 8, 2011
- Posted by: admin
- Category: KWV Holdings
Minority shareholders have welcomed the news that Zeder Investments has sold a 31.8 percent stake in KWV to Hosken Consolidated Investments (HCI) and hope the move will eventually lead to an improvement in KWV’s operating performance.
The 21.8 million shares were sold for cash at R11.80 apiece. Although this is marginally below the R12 a share offered by Pioneer Foods, Zeder is set to realise a substantial profit from its investment in KWV shares.
In October 2009, KWV had a rights issue at R6.23 a share, which was underwritten by Zeder and resulted in Zeder accumulating an additional 5 percent to 6 percent stake.
In 2010, Zeder acquired a substantial block of KWV shares from Vinpro at a price of R9.60 a share and below. Because this acquisition took Zeder’s stake in KWV above 35 percent, an offer had to be made to minority shareholders at R9.60. At the time, the KWV share price was trading on the over-the-counter market at around R10.30.
As part of that process KPMG was asked to undertake a fair and reasonable exercise. The exercise concluded that KWV was worth between R11.50 and R14.30 a share and that therefore Zeder’s R9.60 offer was neither fair nor reasonable.
Just over six months later, in December last year, Pioneer Foods made an offer of R12 a share for KWV. Pioneer is considered to be part of the wider PSG grouping, which includes PSG, Zeder and Kaap Agri. KPMG was again requested by the board to undertake a fair and reasonable exercise. The result of that exercise was never made public but is speculated to have generated a share value of around R13.80.
Analysts say the fact that the KWV share price continues to appreciate despite the company’s poor operational performance reflects two primary considerations: the belief that in the right hands the assets can generate attractive returns and that the group’s stated net asset value of R18.50 significantly understates the true value.
The precise value of these assets became a major point of tension between the KWV board and some minority shareholders during the Pioneer bid. KWV chairman Thys du Toit angrily dismisses allegations from outspoken minority shareholder Chris Logan about “insufficient disclosure” by the liquor company.
“It is wrong to suggest that we are deliberately misleading minority shareholders, we comply with Generally Accepted Accounting Principles and International Financial Reporting Standards,” Du Toit said. He added that Logan’s approach to the matter was inappropriately hostile.
Logan countered that for several months he had been attempting unsuccessfully to get access to critical information used by the KWV board. He said his request for access to the register of assets was neither hostile nor inappropriate in light of the Pioneer bid.
He also noted that KWV’s annual report stated that the register was available for inspection, but he was refused access for four critical weeks, by the KWV board and its lawyers Edward Nathan Sonnenbergs.
Source: Business Report – Ann Crotty