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NOT WORTH THE TROUBLE

09 Feb KWV Holdings

In roughly six weeks, the results of the 850c/share mandatory offer from Hosken Consolidated Investments (HCI) to KWV shareholders will be published.

If HCI elicits a serious response there will be much conjecture (and scurrying through the shareholder register) to figure out which shareholders capitulated cheaply.

If HCI ends up garnering only a handful of shares there will be awkward questions about deliberately triggering a costly offer.

The costs of the mandatory offer are not documented in the circular to shareholders, but there’s a possibility these costs could actually be more than the value of shares HCI will acquire in the buyout.

At present, shareholders can secure a price of 880c/share on the OTC (over- the-counter) market , which — aside from volume considerations — makes the HCI offer rather superfluous.

KWV’s empowerment partner, Withmore, has clearly signalled its intention to decline the offer. A number of professional investors known to the FM are also likely to give the offer a skip.

Former KWV chairman Danie de Wet — who mobilised farmer resistance to the proposed Pioneer/KWV merger in late 2010 — says few farmer shareholders will sell out at the offer price. De Wet agrees that KWV’s upcoming interim results could be shoddy enough to spook shareholders, but believes farmer shareholders will at least wait for the year-end results before making any decision.

No doubt shareholders also took note of an independent valuation from KPMG, deeming the HCI offer “not fair”.

KPMG’s “most likely value” of 1207c/share is more than 40% higher than HCI’s offer, and probably explains shareholder Chris Logan of Opportune Investments’ urgent petitioning of the KWV board for transparency on the value of KWV’s non operational assets. Logan has called on KWV to provide an inventory of the “heritage assets” included in the furniture and fittings reflected in the company’s 2011 annual report as well as copies of valuations done on KWV’s artworks and properties as noted in the mandatory offer circular.

Logan argued: “Should KWV consider that we will somehow gain an unfair advantage from the above information, I point out that it is in the possession of HCI, which is making the bid.” He says an ideal way forward for all shareholders would be for KWV to disclose these valuations as soon as possible (perhaps even in the interim report).

Logan argues: “Hard pressed shareholders may already be accepting the offer, not knowing that KWV’s net asset value is actually worth substantially more than the 1845c/share disclosed in the last annual report.”

Source: Financial Mail – Marc Hasenfuss