After market close on Wednesday CBH — which already holds a 9.75% stake in Sovereign — proposed buying out all Sovereign shareholders at 900c a share.
This is the second time CBH has tilted at Sovereign in recent years, having built a significant minority stake in the company in 2009, before walking away when Sovereign embarked on a rights issue.
The latest pitch by CBH comes only weeks ahead of Sovereign’s general meeting to vote on a controversial empowerment deal. Some market watchers believe the empowerment deal creates a negative control bloc in the company that will entrench the current management team.
The key condition for CBH going ahead with the buyout offer is that Sovereign does not implement the empowerment transaction, and that the offer is accepted by at least 50% of shareholders.
Should the general meeting go ahead, CBH would need to hold a 25% stake in Sovereign, or have enough support from other minority shareholders to block the proposed empowerment deal.
Sovereign directors could not be reached for comment on Wednesday night.
The offer by CBH values Sovereign at about R685m and represents a premium of 25.4% and 21.9% respectively to the ruling share price and the 30-day volume weighted average price as at close of business on July 5. The offer also represents a premium of between 21.3% and 12.8% to the independently assessed fair value of between R7.42 a share and R7.98 a share disclosed in Sovereign’s recent circular to shareholders.
The big question, though, is whether the offer premium is sweet enough for institutional shareholders — most notably Prudential, Sanlam and Old Mutual as well as investment company RECM & Calibre — that have consistently supported Sovereign’s proposals for the empowerment scheme.
RECM & Calibre CEO Piet Viljoen said it was not appropriate to comment on CBH’s offer, as he had not yet seen the offer documentation. Although CBH’s offer is pitched below Sovereign’s last stated net asset value of about R10/share, some market watchers were surprised at the willingness to pay well above market price in a lean period for the local poultry sector.
CBH CEO Marthinus Stander said the company was comfortable making a solid offer that shareholders would seriously weigh up. "We had to go with a solid price. We have one shot (at a deal), and we wanted to make sure we made a good approach to Sovereign shareholders."
Stander said making an offer to all Sovereign shareholders was prompted after unsuccessful attempts to engage the Sovereign board.
"We have made numerous attempts to speak to them since February this year, but nothing materialised," he said.
There has been an acrimonious relationship between Sovereign and CBH prime mover Kevin James. Earlier in 2016 James — via Synapp International and Buzby Trust — bought a significant minority shareholding in Sovereign, and voted against resolutions needed to approve the company’s empowerment scheme.
For more than two decades, I-Net Bridge has been one of South Africa’s preferred electronic providers of innovative solutions, data of the highest calibre, reliable platforms and excellent supporting systems. Our products include workstations, web applications and data feeds packaged with in-depth news and powerful analytical tools empowering clients to make meaningful decisions.
We pride ourselves on our wide variety of in-house skills, encompassing multiple platforms and applications. These skills enable us to not only function as a first class facility, but also design, implement and support all our client needs at a level that confirms I-Net Bridge a leader in its field.
Go to: http://www.inet.co.za
