The board of wine and spirits group KWV will consider publishing the details of the valuations of its valuable heritage assets with its interim results, which are due out later this month.

The publication of the valuation details will assist the minority shareholders in deciding whether or not to accept the R8.50 a share offer that they have received from Hosken Consolidated Investments (HCI). HCI was obliged to make an offer to all shareholders following the purchase of 688 KWV shares at R8.50 a share in December. This purchase pushed HCI’s stake just over the 35 percent level at which an offer has to be made in terms of the Companies Act.

The issue of the valuation of KWV’s heritage assets, the most significant of which include property and works of art, has for several years been a matter of at-times heated dispute between minority shareholders and the board of KWV.

The issue has been aggravated by a series of takeover attempts, which have generally been pitched at a price that does not reflect an appropriate valuation for the heritage assets.

The R8.50 a share offer from HCI, which has been described as reasonable but unfair by KWV’s independent directors, compares with a balance sheet valuation of R18.45 at the end of June last year.

KPMG, which undertook the fair and reasonable analysis of the HCI offer, determined a fair valuation range of between R11.40 and R12.73 for a KWV share.

Chris Logan, who is a minority shareholder in KWV, has long argued that a more appropriate valuation of KWV’s heritage assets would indicate a net asset value of around R25 a share. Logan has been extremely critical of the KWV board’s refusal to provide all shareholders with detailed information about the heritage assets. This information is available to board members.

At last year’s annual general meeting Logan said that the group’s financial statements did not fairly present its financial position because of the accounting treatment of the heritage assets.

He told the meeting that the use of the historical cost basis of accounting was inappropriate for the land and buildings owned by KWV.

Logan was also extremely critical of the fact that some very valuable art works were recorded as “furniture and fittings” and depreciated over five to 10 years. He argued that much of the art work had in fact appreciated by around 25 percent a year.

The board’s decision to consider providing shareholders with details of the recent valuation exercises is in response to requests by a number of shareholders. They have argued that they are at a distinct disadvantage when considering HCI’s offer because they have not been privy to the details of the valuations, which were carried out in the past six months.

In contrast the large shareholders, including HCI and Withmore Investments, which holds 18 percent of KWV, have had access to the valuations because they have representatives on the KWV board.

Meanwhile, Withmore Investments told Business Report it would not be accepting the R8.50 a share offer.

Source: Business Report – Ann Crotty