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Now HCI likes the taste of KWV #wines

HCI to acquire 34.9% of KWV at lower price

By Ann Crotty


Following dramatic developments at the weekend, Hosken Consolidated Investments (HCI) is set to acquire 34.9 percent of KWV from Zeder Investments at R11.80 a share.

Yesterday Business Report was unable to get confirmation of the details from the parties.

HCI chairman Marcel Golding said he could not comment on the reports while on Friday evening KWV chairman Thys du Toit told Business Report he knew nothing about a transaction involving Zeder’s stake.

However, Danie de Wet, a significant minority shareholder in KWV, said he was very happy about the development, which he described as “very good” for KWV.

A sale to HCI would mean that the KWV stake is moved out of the PSG-related group of companies, which includes Kaap Agri, Zeder and Pioneer Foods. Industry analysts noted yesterday that HCI had links with the Rembrandt Group.

The reports of a deal with HCI came just days after the Pioneer and KWV boards announced that Pioneer was withdrawing its R12 a share offer to acquire 100 percent of KWV.

It appears that a valuation, by audit firm KPMG, of around R13.70 a share for KWV was instrumental in Pioneer’s decision to abandon its offer for the Cape-based wine and spirits company. On Friday Du Toit would not comment on the R13.70 figure other than to say that the KPMG valuation process had been terminated because the offer was dropped.

The decision to abandon the offer followed a meeting with a shareholder, understood to represent black economic empowerment investor Withmore, which indicated unhappiness about the R12 offer.

A joint Stock Exchange News Service (Sens) announcement released by Pioneer and KWV on February 2 said: “…the parties have concluded that there will not be sufficient support to pass the resolution to approve the proposed scheme at the scheme meeting”.

Shareholder activist Theo Botha, who is acting on behalf of one of KWV’s minority shareholders, said on Friday that the Sens announcement indicated that the decision to abandon the offer was taken by Pioneer and the KWV board.

While Botha was dismissive of the R12 offer he queried whether the board had the authority, in terms of the securities regulation code, to agree to it being abandoned without input from all shareholders.

Botha said that this was yet another indication of the conflicted role of the KWV board that had been evident throughout the transaction. He called again on Du Toit, Jannie Mouton and Anton Jacobs to resign from the KWV board because of their involvement with PSG and entities associated with it.

KWV minority shareholder Chris Logan, who has been an outspoken critic, said yesterday he was confident that KWV was worth considerably more than R12 and was delighted Pioneer had withdrawn its offer.

He argued that the relatively low share price, compared with his estimate of a net asset value of over R24 a share, reflected the inefficient management of KWV, whose operational cost structure was considerably higher than competitors.

Logan said the share price would be stronger if the company was managed efficiently. He referred to KWV’s strategic five-year goal, outlined in October 2009, of generating a return on equity of 15 percent by 2014. This level of return would produce annual earnings of around R3 a share. In 2010 KWV generated an operating profit of R20 million, which equated to a 2 percent return on equity. – Business Report

 

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