Country Bird set to block Sovereign's BEE scheme

On Monday, Kevin James, CEO of CBH, said the company had secured the backing of 26.6% of Sovereign’s shares. "We either own the shares or have the backing of shareholders sufficient to block the scheme."

Although the scheme had irrevocable support from institutions with a combined 70%, some of the smaller institutions are reported to have sold out to CBH. With just more than 25%, CBH can block the scheme, which needs the support of 75% of shareholders.

The meeting, scheduled for July 25, will vote whether to implement a proposal that would introduce black economic empowerment (BEE) shareholders to Sovereign. In addition, the proposal would create an effective control block with top management and BEE shareholders holding 27%. This would make it almost impossible for a third party to wrest control.

Tuesday is the last day to trade to be able to vote at the Sovereign meeting. But even if CBH succeeded in cancelling or delaying the scheme meeting, it might have to sweeten its offer if it wants to gain control of Sovereign. Small shareholders, such as Albie Cilliers and Asief Mohamed of Aeon Investments, are not convinced the offer of R9 a share is sufficiently attractive.

Last week, CBH announced the offer for 50% plus one share of Sovereign at a price that was significantly greater than that at which it was trading ahead of the announcement. But shareholders say the offer excludes a dividend or interest payments — critical in what could be a drawn-out battle for control.

In what may have been a bid to calm the concerns of Sovereign’s management, CBH has said it views the commitment of Sovereign’s management and employees as important to the continuing success of the combined businesses. CBH also said it would "seek to ensure that Sovereign’s management and employees are given the financial and operational support necessary to manage and grow Sovereign’s business".

But CBH did say it could not confirm whether any of the directors of Sovereign would continue to act as directors if the offer succeeded. It lacked specific information on the service contracts of the Sovereign directors. "CBH cannot confirm whether or not the emoluments payable to Sovereign directors will be affected by the offer."