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#KWV and pioneer part ways

Marc Hasenfuss

In a joint statement on Wednesday, the firms indicated that the possibility of an offer price adjustment had meant there would not be sufficient shareholder support at KWV for Pioneer’s takeover bid.

There were early indications that Pioneer could lower its bid for KWV, after concerns about the liquor maker’s current profit performance.

A trading statement released on Tuesday evening by KWV confirmed a marked drop in earnings for the interim period ending December 2010.

While the onset of poor trading would normally justify a company pulling out of a proposed acquisition, there are market watchers who believe Pioneer may also have been influenced by certain shareholders’ negative reaction to the proposed deal.

Some shareholders have argued that Pioneer’s takeover of KWV would have benefited PSG-owned Zeder Investments [JSE:ZED] – which owns influential stakes in both businesses – more than ordinary shareholders.

Finweek speculated last month that Zeder may have grand long-term plans to build a much bigger position in Pioneer by buying out Kaap Agri minority shareholders.

Kaap Agri is the biggest single shareholder in Pioneer.

The proposed Pioneer offer asked KWV shareholders to swap their shares for a cash settlement, as well as a small portion of Pioneer shares.

A number of shareholders and market commentators believed the 1 200c/share offer undervalued KWV, which has a conservatively stated net asset value of 1 800c/share. The initial offer was valued at R828m.

Although operationally speaking KWV cannot compare to a market leader like Distell, a number of vocal shareholders have called for KWV to follow its own course of development and be listed on the JSE rather than incorporated into the sprawling Pioneer business.

With Pioneer out of the picture, the question now is whether Halewood, a niche liquor group owned by a British parent company, will come into the picture.

Fin24 understands that last month Halewood pitched a formal offer to KWV that proposes a merger of the businesses.

*(We felt from the outset that the takeover bid was more of a looting spree and are glad this deal is off)



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