Finweek English Edition - - Cover -

PER­HAPS the first thing mi­nor­ity share­hold­ers faced with a buy­out of­fer need to know is that they “don’t need to go gen­tly…” Over the years there haven’t been too many in­stances of mi­nori­ties suc­cess­fully de­fend­ing buy­outs from ei­ther par­ent com­pa­nies or man­age­ment.

But the vic­to­ries that we can re­call have been sig­nif­i­cant (and, hope­fully, in­spir­ing): most notably, re­tail gi­ant Shoprite (a pri­vate eq­uity pitch) and build­ing sup­plies firm Ma­sonite (whose US par­ent wanted to mop up mi­nori­ties). (See re­port page 34). The re­sis­tance was re­ward­ing, as both com­pa­nies have proved their worth to share­hold­ers over the past few years.

But even if share­hold­ers’ re­sis­tance doesn’t de­rail a buy­out, ve­he­ment and vo­cal re­sis­tance from mi­nori­ties can some­times se­cure a bet­ter buy­out of­fer or en­sure con­tin­ued par­tic­i­pa­tion in an un­listed com­pany. The clas­sic “fight­back” ex­am­ple would be from the early Nineties, when the late, great share­holder ac­tivist Issy Gold­berg coaxed the direc­tors of Tafel­berg Fur­nish­ers into a stuffy store­room for ne­go­ti­a­tions that ul­ti­mately eked out a few more cents to make the buy­out of­fer more palat­able.

SA Share­hold­ers’ As­so­ci­a­tion chair­man David Sylvester says al­though mar­ket reg­u­la­tion and in­vestor pro­tec­tion have in­creased dra­mat­i­cally over the years, mar­ket forces still op­er­ate. “There are rules in place for the num­ber of share­hold­ers and per­cent­age of eq­uity to be gar­nered in or­der to delist, ex­e­cute trans­ac­tions greater than a cer­tain quan­tum and the like.” He says though mi­nor­ity share­hold­ers do have some pro­tec­tion they tend to be com­pla­cent. “When you feel ag­grieved you need to be heard – but there’s a limit to what you can do…”

JSE busi­ness de­vel­op­ment man­ager Lauren Czepek says: “Our rules are in place to en­sure fair treat­ment in the process. Whether share­hold­ers de­cide to take up the of­fer is an in­vest­ment de­ci­sion that they must be comfortable with.”

In de­ter­min­ing the mer­its of a spe­cific buy­out of­fer it’s ad­vis­able for share­hold­ers not just to scan the lat­est fi­nan­cial state­ments but to go right back to the orig­i­nal prospec­tus or prelist­ing doc­u­men­ta­tion. Re­mem­ber: com­pa­nies are cur­rently in a squeeze, thanks to global eco­nomic un­cer­tainty and more lo­calised is­sues, such as tighter in­ter­est rates, higher fuel costs, the weaker rand, etc.

Eco­nomic con­di­tions (touch wood) can change quickly, so it’s im­por­tant to main­tain a longert­erm view on prospects. Check whether the com­pany has de­liv­ered strate­gi­cally and op­er­a­tionally on its pre-list­ing prom­ises. If things have gone awry it’s im­por­tant to un­der­stand why and to ap­ply those find­ings in a for­ward-looking man­ner to the busi­ness. In other words: Is the cur­rent pres­sure on prof­its a blip in what’s oth­er­wise an ap­peal­ing long-term growth story?

Try fig­ur­ing out how the funds raised at list­ing have been utilised and whether the as­sets ac­quired or strate­gic capex could see the busi­ness grow markedly in fu­ture years.

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