The largest minority shareholder in KWV will not be accepting the R8.50 a share offer from Hosken Consolidated Investments (HCI).

Khutso Mampeule, the executive chairman of Withmore Investments – which holds an 18 percent stake in the Paarl-based liquor group, told Business Report yesterday that it would not be taking up the offer because “it is too low”.

Mampeule said that last year it rejected an offer of R11.80 a share for KWV because it was below what the company was worth. “Now, 12 or so months later we get an offer that is even lower.”

The offer of R11.80 a share was made in 2010 by Pioneer Foods. The offer was withdrawn in the face of considerable hostility from many of the KWV shareholders who described it as opportunistic. In an unexpected move, Pioneer Foods and its associate, PSG, then sold a 34.9 percent stake to HCI.

News that Withmore Investments will not be accepting the latest R8.50 a share offer is significant for KWV’s minority shareholders who are considering the bid. The rejection means that it will not be possible for HCI to get the 90 percent holding that would enable it, in terms of the Companies Act, to squeeze out the remaining 10 percent of the KWV shareholders.

One minority shareholder told Business Report that if there was no chance for HCI to squeeze out the minorities, then there was scope for the KWV share price to move above its current over-the-counter trading level of R8.80. “If shareholders no longer expect to be squeezed out by HCI then shares might trade closer to their underlying net asset value.”

Mampeule said that the relatively low and unattractive offers being made for KWV was “due to the company’s poor financial performance”.

He noted that while there had been much media discussion about the valuable property and art assets owned by the company, this was often a distraction from the important fact that management had to focus on performance.

A number of shareholders have criticised the board for not appointing a chief executive who has experience in the industry and note that the current acting chief executive is the third person in that position without industry experience. “They have some very good brand managers just below the very top executive level,” remarked one shareholder.

However, Mampeule said that, as a KWV board member, it was not appropriate for him to comment on the position of chief executive or the future of the company’s property and art assets. “The focus should be on turning the company around.”

Yesterday’s news that Distell is expected to report an increase in earnings of between 20 percent and 25 percent is likely to add to the performance pressure on the KWV board and management.

Source: Business Report