Sovereign Foods set to bow out on high note

Business Day - - THE BOTTOM LINE -

It looks as though Sovereign Foods will go out on a high note. Share­hold­ers at­tend­ing Mon­day’s meet­ing voted over­whelm­ingly in favour of the two res­o­lu­tions needed to im­ple­ment the Cap­i­tal­works of­fer and delist the share. More than 90% of share­hold­ers at­tended the meet­ing and all of them voted in sup­port of the first res­o­lu­tion.

The sec­ond res­o­lu­tion, which re­lated to the pro­posed ter­mi­na­tion of the list­ing, was not as pop­u­lar. A lit­tle more than 34% of share­hold­ers ab­stained from the vote and 54% of share­hold­ers voted in sup­port, so the share’s set to exit the JSE mid­way through Novem­ber.

Given the fig­ures in­volved it’s safe to as­sume that Coun­try Bird Hold­ings (CBH), which ac­quired 34% in 2016, was be­hind the ab­stain­ers. CBH did in­di­cate it would ac­cept the R12 a share of­fer from Cap­i­tal­works as it was un­happy about re­main­ing as a sig­nif­i­cant share­holder in an un­listed en­tity. This means CBH is set to make a rea­son­ably easy R3 a share profit (be­fore ex­penses) on its bid for Sovereign.

Some mi­nor­ity share­hold­ers have in­di­cated that they will re­main on in the un­listed en­tity. They’ve been en­cour­aged by the re­cent signs of gen­eral im­prove­ment in the in­dus­try as well as in­di­ca­tions of spe­cific im­prove­ment at Sovereign as it de­vel­ops its niche mar­kets.

Most are likely to take their money and go. Per­haps they will give a nod of thanks to CBH for en­sur­ing they got such an at­trac­tive price.

With Sovereign’s fate se­cured, there’s now talk of CBH per­haps turn­ing its sights on RCL’s chicken busi­ness. It’s prob­a­bly much too early for CBH to even think of get­ting back in the ring, but it is about time Rem­gro did some­thing about RCL’s un­der­per­form­ing chicken busi­ness. De­spite re­turn on eq­uity be­ing dis­mal, the man­age­ment is re­warded with ex­tremely gen­er­ous re­mu­ner­a­tion pack­ages an­nu­ally.

The story of prop­erty syn­di­ca­tion scheme Share­max is a long and sorry one. In short: thou­sands of pen­sion­ers lost more than R4bn on failed prop­erty de­vel­op­ments.

Fast for­ward seven years since the scheme im­ploded, and Nova Prop­erty Group was es­tab­lished to pick up the pieces, and a JSE list­ing of the old Share­max prop­erty port­fo­lio is on the cards.

Much fuss has been made, and rightly so, over the fact that Nova’s seven di­rec­tors will re­ceive 43% of the listed en­tity, which stake has a no­tional value of about R 946m. The fuss is over the fact that when Nova was born to man­age Share­max prop­er­ties and avoid liq­ui­da­tion, the di­rec­tors re­ceived about 97% of Nova’s shares free, be­cause most in­vestors elected to take up deben­tures, ef­fec­tively debt in­stru­ments, rather than shares in Nova.

Nova di­rec­tors will tell you that, at the time, the shares were worth noth­ing and that they, through blood, sweat and tears, have cre­ated the value that ex­ists to­day. Still, it is handy re­ward for their toil.

What un­doubt­edly mat­ters more to Nova’s deben­ture hold­ers than the di­rec­tors’ free shares is whether they stand to get their money back. In this re­gard, a list­ing, as one com­men­ta­tor put it, is “the best of the worst op­tions”.

While this is not ex­actly the best eco­nomic en­vi­ron­ment in which to be list­ing a South African-fo­cused prop­erty fund, a list­ing should, if noth­ing else, of­fer the 20,000-odd mostly el­derly in­vestors an exit. One can only hope, for their sake, that it is at a fair price.

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