THERE might be an unexpected twist to a R1.15bn deal proposing the sale of liquor group KWV Holdings’ operating assets to Vasari Global, an international company aligned to consumer goods magnate Vivian Imerman.

If a large number of minority shareholders attempt to exit KWV at a fair value price through an appraisal rights option, there is the possibility they could inadvertently scupper the proposed transaction.

The circular outlining the proposed deal makes provision for dissenting KWV shareholders objecting to the Vasari bid to exercise appraisal rights. This effectively means KWV would have to buy back the unlisted shares of dissenting shareholders at fair value.

The fair value figure would be considerably higher than the 500c-600c range that KWV shares traded in on the company’s over-the-counter platform before the offer by Vasari was tabled.

The inferred value figure for KVW is R19.81 a share — based on the R16.91 a share offer by Vasari for KWV’s operating assets and the 300c a share tagged to the “heritage assets” that will remain behind in the company. But a “fair value” price could be markedly lower.

Auditing firm KPMG’s fair and reasonable assessment of Vasari’s offer concludes that a “most likely” fair value for KWV’s “sale assets” is about R832m, which equates to about R13.47 a share. This would infer a fair value of R16.47 a share if the “heritage assets”, mainly property and art works, are added back.

Technically speaking, dissenting shareholders could derail the Vasari/KWV deal. To exercise their appraisal rights, dissenting shareholders will need to vote against resolutions proposing the sale of KWV’s operating assets at an upcoming general meeting. Should more than 25% of shareholders vote against resolutions, the Vasari deal would be blocked.

KWV minority shareholders were reluctant to comment on possible outcomes stemming from the appraisal rights opportunity. But the overriding argument was that a lack of clarity on what KWV intended doing with the proceeds received from Vasari over a three-year settlement period was creating some uncertainty in shareholders’ minds.

One shareholder believed that if there was a chance to take cash settlement — even if it was lower than the inferred price set by the Vasari transaction — then more than a few minorities might opt for the security of having their shares bought back through the appraisal rights mechanism.

KWV is 57% controlled by Niveus Investments, which in turn is 52% owned by investment conglomerate Hosken Consolidated Investments (HCI).

KWV has not given any indication of what it intends doing with the R1.15bn it will receive from Vasari. In a statement to shareholders in May, KWV said that “no immediate plans exist for the application of the proceeds, and the cash will be retained by the group”.

KWV CEO Andre van der Veen is on leave and other executives were not available for comment at the time of going to press.

There is speculation that HCI/Niveus might prefer squeezing out minorities through the appraisal rights mechanism — thereby increasing their stakes in KWV. This might signal that HCI/Niveus believed the heritage assets — which include iconic properties such as Laborie and La Concorde in Paarl as well as a large collection of South African art — are worth considerably more than the indicative 300c/share.

Source: BDLive – Marc Hasenfuss