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KWV MINORITIES AWAIT KPMG REPORT

16 Jan KWV Holdings

The long-standing controversy surrounding the value of wine and spirits group KWV looks set to rear its head again with the release of KPMG’s report on the “fair and reasonableness” of Hosken Consolidated Investments’ (HCI) R8.50 a share offer to KWV’s minority shareholders.
Minority shareholders have indicated that they were unhappy with the offer and believed that it attached no value to the valuable art and property owned by KWV.

HCI said the offer price represented a premium to the level at which KWV had been trading in the over-the-counter market. The R8.50 offer was also seen as in line with KWV’s poor operating performance.

However, minority shareholders point out that it is significantly below the R18.45 net asset value reflected in the company’s June balance sheet. They further point out that the R18.45 does not adequately reflect the art and property owned by KWV.

The KPMG report will be included in the circular sent to KWV shareholders at the end of this month setting out the details of the HCI offer, which was initially announced on December 21.

The offer of R8.50 a share from HCI is significantly below the R11.80 a share that HCI paid Zeder Investments last February for its 34.9 percent KWV stake.

However, last month’s announcement revealed that the R8.50 offer was equivalent to what HCI had recently paid for a block of 688 KWV shares. That block of shares pushed HCI’s holding in KWV above the crucial 35 percent level at which a mandatory offer has to be made to minority shareholders.

In terms of the regulations set out by the new Companies Act, HCI is only obliged to match the highest price it paid for shares that were acquired in the six months before making its mandatory offer.

KWV minority shareholder Chris Logan, who challenged much of the corporate drama overshadowing KWV’s operations for the past 24 months, told Business Report he looked forward to seeing the details of KPMG’s report on the offer.

Logan said that minority shareholders were at a considerable disadvantage when considering the offer because they did not have access to all of the information involved in the balance sheet valuations.

This was not the first time that KPMG has undertaken a ‘fair and reasonable” report on KWV. In May 2010, KPMG released the results of an investigation, undertaken at the request of the then KWV board, which concluded that KWV was valued at between R11.50 and R14.30 a share.

This valuation was made in response to an offer of R9.60 a share from Zeder. In light of its valuation, KPMG said Zeder’s offer to KWV shareholders was “neither fair nor reasonable”.

The relatively low price now being offered by HCI has sparked speculation that HCI is not particularly interested in increasing its stake above the crucial 35 percent level.

In the absence of any organised opposition from shareholders with significant holdings, the 35 percent block would be sufficient for HCI to exercise effective control.

It is unclear how well HCI operates with KWV’s black economic empowerment partner, Withmore 1, which holds 25.1 percent of KWV.

Source: Business Report