The Wiese rid­dle

New Sho­prite pro­pos­als don’t even men­tion whether he’s en­ti­tled to vote his shares

Finweek English Edition - - Companies & markets - BY MICHAEL COUL­SON

SO THOSE WHO THOUGHT a Sho­prite share price trad­ing above the in­di­cated of­fer of R26 meant that fur­ther ac­tion was likely have been proved right. And with pre­vi­ous ob­jec­tor Al­lan Gray com­mit­ting it­self to ac­cept­ing the new terms – though it may still face some hard talk­ing to per­suade all its clients to go along – any fund man­agers who re­main op­posed to the deal have lost much of their bar­gain­ing power. Af­ter all, Al­lan Gray and its clients con­trol 26,5% of Sho­prite’s or­di­nary shares.

Al­lan Gray has cer­tainly been able to win ma­jor im­prove­ments in the deal as the price of its ac­qui­es­cence. Briefly, the base price (to be es­ca­lated if the deal isn’t con­cluded by mid-March) is up R2 to R28; ex­ist­ing share­hold­ers will be able to sell part of their hold­ings with­out for­feit­ing the right to par­tic­i­pate in the new com­pany for the rest of their shares; and talks are to be held with the JSE to see whether a listed in­stru­ment can be de­vised that would give ex­po­sure to the new com­pany.

Given the bull-headed as­ser­tions by spokes­men for the buy­out that changes to the terms were un­think­able, that’s a big climb-down and Al­lan Gray must be con­grat­u­lated for its part in the process. But it doesn’t meet all the ob­jec­tions.

In the first place, care­ful word­ing makes it clear that there’s no guar­an­tee that the talks with the JSE will suc­ceed. My in­ter­pre­ta­tion is that trans­ac­tion leader Brait and its col­leagues are hop­ing to de­sign some form of in­di­rect in­vest­ment in the Sho­prite suc­ces­sor com­pany, still unimag­i­na­tively known as New Re­tail. Af­ter all, the ex­er­cise loses much of its point if Sho­prite is sim­ply re­placed by a mir­ror im­age New Re­tail.

Given the JSE’s per­fectly rea­son­able dis­like of pyra­mid-type com­pa­nies, this may re­quire fair in­ge­nu­ity. Still, that’s what in­vest­ment banks are paid huge fees for; and it’s in ev­ery­body’s in­ter­est to find a so­lu­tion.

How­ever, the one key ob­jec­tion that the new pro­pos­als don’t ad­dress – or even men­tion – is whether Christo Wiese is en­ti­tled to vote his shares. Now the ques­tion of whether Wiese’s pref­er­en­tial vot­ing rights are le­git­i­mate, and why in­vestors didn’t ob­ject when they were cre­ated a few years ago, is a red her­ring. Were I a Machi­avel­lian I might even sus­pect that it was de­lib­er­ately raised by the framers of the deal to draw at­ten­tion away from the real is­sue.

That is, sim­ply, that Wiese shouldn’t be al­lowed to ex­er­cise any of his votes.

He’s too in­ti­mately in­volved, not only on both sides of the deal but also in the mid­dle. It’s all very well say­ing that ev­ery­body knows that Wiese con­trols the com­pany, but Wiese, with his le­gal back­ground and long busi­ness ex­pe­ri­ence, also knows that if you want the ben­e­fits of a stock ex­change list­ing, you have to ac­cept the re­spon­si­bil­i­ties. One of the most fun­da­men­tal of those is that you may have to limit the ex­er­cise of your own power in the in­ter­est of eq­ui­table treat­ment of oth­ers.

There’s as yet no word from the Fi­nan­cial Ser­vices Board on whether the re­vi­sion of the deal will af­fect its planned de­lib­er­a­tions. Frankly, it’ll be a dis­grace if it does; im­por­tant is­sues of prin­ci­ple still need to be set­tled.

Al­lan Gray may have done its bit, but I hope other dis­si­dent fund man­agers, such as Coro­na­tion and Pere­grine, won’t now sim­ply throw in the towel just for an­other R2/share.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.