Mys­tery of R10bn JSE Dis­tell trade

Ex­change and firm tight-lipped as hefty trans­ac­tion baf­fles share­hold­ers

Business Day - - FRONT PAGE - Ann Crotty crottya@bdfm.co.za

The JSE and Dis­tell are re­fus­ing to shed any light on a R10bn trade in Dis­tell shares on Oc­to­ber 6, leav­ing mi­nor­ity share­hold­ers to guess who the par­ties were be­hind the com­pany’s big­gest share trade to date. The shares were traded at R170 each, rep­re­sent­ing a hefty premium on the R130 at which the share price was trad­ing on the day.

The JSE and Dis­tell are re­fus­ing to shed any light on a R10bn trade in Dis­tell shares on Oc­to­ber 6, leav­ing mi­nor­ity share­hold­ers to guess who the par­ties were be­hind the com­pany’s big­gest share trade.

The shares were traded at R170 each, rep­re­sent­ing a hefty premium on the R130 at which the share price was trad­ing on the day. Share­hold­ers had as­sumed the 58.7-mil­lion shares that went through the mar­ket on Oc­to­ber 6 were the sale by An­heuser-Busch InBev (AB InBev) of its 26.4% Dis­tell stake to the Pub­lic In­vest­ment Cor­po­ra­tion (PIC).

But this as­sump­tion was at odds with Dis­tell’s an­nual re­port, which stated that as at end-June 2017, the PIC held 61.6-mil­lion Dis­tell shares, equiv­a­lent to 27.6% of the com­pany. The com­pany’s share regis­ter con­firms that the PIC al­ready held the 58.7-mil­lion shares at the end of April.

This is in line with a Sens state­ment is­sued by Dis­tell on April 12, which no­ti­fied share­hold­ers that a sub­sidiary of AB InBev had sold its 26.4% stake in Dis­tell. The Sens state­ment also said the PIC had ac­quired the in­ter­est in Dis­tell and “it now holds a ben­e­fi­cial in­ter­est in the com­pany of 27.6%”.

There was no sign of this vol­ume of shares be­ing traded in the mar­ket so Dis­tell mi­nor­ity share­hold­ers as­sumed it had been done off-mar­ket. All these as­sump­tions held firm un­til mar­ket watch­ers spot­ted the R10bn trade on Oc­to­ber 6.

The com­pany did not is­sue a Sens state­ment, which it is re­quired to do af­ter a sub­stan­tial trans­ac­tion. The shares are tightly held, with Rem­gro-Capevin hold­ing 53% and the PIC 27.6%. Dur­ing fi­nan­cial 2017 only 14-mil­lion Dis­tell shares were traded.

The PIC’s Deon Botha told Busi­ness Day it was not party to the trans­ac­tion on Oc­to­ber 6.

Dis­tell sug­gested it was the PIC pur­chase of AB InBev shares, but when pressed for de­tails would only say, “It was a neu­tral trade.”

The JSE was also tight-lipped on the un­prece­dented size of the trade. “We can­not pro­vide com­ment as the JSE, as the iden­tity of the par­ties be­hind the trade is priv­i­leged in­for­ma­tion that we can­not share pub­licly as the mar­ket reg­u­la­tor,” said a spokesper­son for the ex­change.

Dis­tell mi­nor­ity share­holder Al­bie Cil­liers is stunned by the re­sponse and wants Dis­tell to ex­plain what a “neu­tral trade” is. He also wants to know why the Oc­to­ber 6 trade is not re­flected on the com­pany’s share regis­ter. Cil­liers raised the pos­si­bil­ity that there may have been an at­tempt to ma­nip­u­late the mar­ket.

“Since the price of the block trade hap­pened at R170 a share while the mar­ket price was around R130 a share it does raise the pos­si­bil­ity of an at­tempt at ma­nip­u­la­tion,” he said.

“Did some­body trade with them­selves in order to in­flu­ence the mar­ket?”

The ab­sence of dis­clo­sure around the Oc­to­ber 6 trade not only left mi­nori­ties in the dark but was con­trary to the re­quire­ments of the Com­pa­nies Act and the JSE reg­u­la­tions, he said.

“The JSE’s lack of con­cern around this R10bn trans­ac­tion seems to­tally at odds with the heavy-handed treat­ment of James Gubb’s R400 trade in Oak­bay shares,” said Cil­liers.

THE COM­PANY DID NOT IS­SUE A SENS STATE­MENT, WHICH IT IS RE­QUIRED TO DO AF­TER A SUB­STAN­TIAL TRANS­AC­TION

In­vestors didn’t seem very im­pressed with An­heuserBusch InBev’s (AB InBev’s) change of lead­er­ship at its crit­i­cal North Amer­i­can op­er­a­tion. The share price eased back in early trade on Tues­day fol­low­ing Mon­day’s an­nounce­ment.

The ap­point­ment of Brazil­ian-born AB InBev vet­eran Michel Douk­eris is rem­i­nis­cent of SABMiller’s ap­point­ment of Norman Adami to head the re­cently ac­quired Miller op­er­a­tion back in 2003.

The SAB team was strug­gling to re­v­erse the for­tunes of the US num­ber two player and turned to its own home-grown tal­ent in the form of Adami to pull off an al­most im­pos­si­ble chal­lenge.

There are dif­fer­ences this time: Douk­eris is re­plac­ing a long-serv­ing vet­eran of the South Amer­i­can beer com­pany that ac­quired its way to the global num­ber one po­si­tion, and the US prob­lems are in large part linked to AB InBev’s man­age­ment style. An­a­lysts con­tend it re­lies too much on cost-cut­ting its way to profit growth.

Sales in the US, which is the largest profit pool in the global beer mar­ket, have been on the de­cline for four years, de­spite the pur­chase of 10 do­mes­tic craft brew­eries. The Septem­ber quar­terly re­sults re­vealed a 6.2% drop in sales, which was al­most en­tirely at­trib­ut­able to the weak­ness of AB InBev’s two most im­por­tant brands, Bud­weiser and Bud Lite.

Group CEO Car­los Brito says Douk­eris’s back­ground in sales will help tackle the chal­lenge. He adds that the crit­i­cal North Amer­i­can busi­ness will fo­cus on cat­e­gory ex­pan­sion and cat­e­gory man­age­ment, which he says are ap­proaches learned from SABMiller.

The waters in the lo­cal fish­ing in­dus­try have started to look a tad chop­pier as the 2020 al­lo­ca­tion of long-term fish­ing rights draws closer.

There has not been a flurry of ac­tiv­ity yet, aside from un­listed Ter­rafin ac­quir­ing the Sal­danha Group’s fish­ing in­ter­ests and Pre­mier Fish­ing snap­ping up squid spe­cial­ist Tal­hado.

Of course, the big talk around the quays is whether a buyer will emerge for AVI’s fish­ing as­sets (I&J, Sim­plot and a large abalone farm), which have been put up for “re­view”.

In the mean­time, Bid­vest Namibia — a sub­sidiary of JSElisted Bid­vest — has re­newed a cau­tion­ary an­nounce­ment around en­ter­ing ne­go­ti­a­tions to sell its 100% in­ter­est in Bid­vest Namibia Fish­eries Hold­ings (BidFish), ex­clud­ing cer­tain (un­spec­i­fied) as­sets.

BidFish is a size­able op­er­a­tion spread across Namib­ian and An­golan waters, gen­er­at­ing sales of more than R1bn from frozen horse mack­erel, monk­fish, sar­dines, canned pilchards, fish­meal, fish oil and oys­ters.

It is an in­ter­est­ing time for Bid­vest Namibia to con­tem­plate a sale of its fish­ing as­sets. BidFish en­dured a rough fi­nan­cial year to end-June 2017, with trad­ing prof­its sink­ing to about R40m from al­most R200m in the pre­vi­ous fi­nan­cial year.

Commentary in the Bid­vest Namibia an­nual re­port noted de­spon­dently that low pri­vate sec­tor quo­tas — most no­tably horse mack­erel and sar­dines — had be­come en­dur­ing fea­tures of the mar­ket.

Ves­sels are op­er­at­ing at or be­low the profit line and di­rec­tors noted pres­sure on profit mar­gins mount­ing ev­ery year.

The ini­tial sug­ges­tion was that BidFish’s ves­sels could be sold or laid up for a pe­riod.

Now it seems more dras­tic ac­tion must be taken. Pre­sum­ably, a few South African fish­ing en­ter­prises are mulling the price of such a de­ci­sion.

Graphic: RUBY-GAY MARTIN Source: BLOOMBERG

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