Feathers ruffled in tussle for Sovereign stock

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Sovereign’s latest shareholder register shows that Country Bird Holdings (CBH) picked up more than 1-million Sovereign shares last month.

This equates to a 1.4% stake in the Uitenhage-based poultry producer.

On paper, CBH’s shareholding does not carry much influence. But the position is intriguing, since CBH’s prime mover, Kevin James, has already built a substantial nest in Sovereign through two nominee companies.

Synapp International and the Buzby Trust — two entities associated with James — collectively hold 8.33% of Sovereign.

The bulk of this holding was acquired at the end of last year.

The exact intentions of James, who has kept a low profile since emerging as a key shareholder, are not clear at this point. On Monday, his legal counsel Clint Holing of Kern & Partners indicated that it was unlikely James would comment on developments.

James has a history with Sovereign, having acquired — via CBH — a sizeable stake in the business in 2008. CBH was initially involved in a two-way tussle for Sovereign with agri-business conglomerate Afgri, but both parties retreated when Sovereign opted to recapitalise its balance sheet through a rights issue in 2009.

Sovereign has a market capitalisation of about R500m and strong support from institutional shareholders like Prudential, Old Mutual, Sanlam and RECM & Calibre — which might preclude CBH launching a takeover of the business.

Opportune Investments CEO Chris Logan — one of the dissenting shareholders — said that if James was serious about investing in Sovereign, he should table an open bid for the company and engage with shareholders and the board. Logan said that CBH — which delisted from the JSE last year — now boasted the Black River Food Fund as a significant investor.

"Black River invests in leading companies in the food industry, and clearly gives CBH greater financial fire power, capability and credibility."

James’s presence on the shareholder register has irked Sovereign’s board of directors. Last month Sovereign chairman Tom Pritchard said the company still enjoyed strong shareholder support despite Mr James’s attempts to frustrate an important empowerment deal and simultaneous capital return to shareholders (via a share buy-back).

Earlier this year James and other dissenting shareholders tried to block Sovereign’s proposed empowerment transaction — despite the company having support of institutional shareholders representing about 70% of the company.

Minority shareholder dissatisfaction harks back to last year’s annual general meeting when criticism was levelled at Sovereign’s board for taking substantial performance fees that pecked away at bottom-line profits. The criteria for awarding the performance bonuses was also revised — without shareholders’ consent — from achieving return on equity and return on assets targets to a measure based on margins.

Sovereign has lately seen its shares on the JSE trading at a wider discount to its intrinsic net asset value of over R10/share. This has ensured ongoing speculation that the firm is a takeover target.

Some shareholders, however, believe the proposed empowerment scheme — which includes Sovereign’s executives — would effectively block any takeover bid. Shareholders are set to vote on the revised empowerment scheme this month.