Two Quantum roosters shut out small investors

Shares in Quantum Foods, a humble little producer of poultry, eggs and animal feeds, are up about 75% since June 8. It’s amazing what a little moving and shaking on the share register can do.

Zeder Investments must now rue kicking off developments by selling its 30% stake in Quantum to unlisted poultry producer Country Bird Holdings (CBH) for just 500c a share.

Quantum may not be the most exciting business in the world, but clearly its role in the local poultry supply chain has huge strategic value. Otherwise, why would so many key players determinedly snap up large parcels of scrip?

It now transpires that CBH initially expressed an interest in making an offer to minority shareholders of Quantum, but backed off. The about-turn might be explained by the emergence of another bidder, which has entered the fray with agreements with certain institutional shareholders that hold 32% of Quantum. This entity — which speculators believe may be related to an investor associated with another poultry player, Sovereign Foods — is also not signalling an intention to make an offer to Quantum minorities.

Quantum will need to publish the identity of this entity in the next few days. Other third parties and key Quantum directors have also shown an interest in acquiring Quantum shares, but with no current intention of making an offer to minorities.

This leaves Quantum at an uneasy impasse. CBH and the unnamed entity each have a blocking stake, or — seen another way — a very valuable “kingmaker” stake.

CBH is already up 35% on its 500c a share buy-in, allowing for a distinguished exit if the feathers really start flying.

SASOL

A s a company that makes fuel from coal, Sasol needs to produce fuel at a price that can compete with global oil prices.

So it’s no surprise that after Brent crude oil prices crashed to near $21 a barrel and now remain at the $40 mark, the chemicals and synthetic fuels producer is scrambling to cut costs and sell assets to pay down debt. It’s also moving to restructure, with an unknown number of jobs on the hook.

But you’d be forgiven for feeling as if you’ve heard this before. That’s because you have.

In mid-2014 oil prices plunged from $110 a barrel to less than $50 by early 2015 and went as low as $30 a barrel a year later.

CBH AND THE UNNAMED ENTITY EACH HAVE A BLOCKING STAKE

Sasol implemented plans and reviewed cost and cash savings targets to ensure the business is sustainable at “lower for longer” oil prices. Jobs were cut and assets were identified for disposals, with some being sold.

Undoubtedly, progress was made. But the rising oil price, as it tends to do, slowly washed away Sasol’s austerity ambitions. Instead, the group went on to build its troubled Lake Charles Chemicals Project in Louisiana.

Its net debt grew so large it now poses a threat to the group’s sustainability even at higher oil prices. But if it’s only a low oil price that can propel Sasol to take long-overdue action, long may it last.