Say hello to Halco

Finweek English Edition - - Companies&markets - MARC HASEN­FUSS

LAST YEAR Fin­week raised ques­tions about the non-dis­clo­sure of part of the own­er­ship struc­ture at con­tainer man­age­ment group Trencor. At an AGM in May last year, sev­eral share­hold­ers – in­clud­ing share­holder ac­tivist Theo Botha and as­set man­ager Chris Lo­gan – queried the struc­ture used to house Trencor’s in­ter­ests in New York Stock Ex­change-listed op­er­at­ing sub­sidiary Tex­tainer, one of the world’s biggest con­tainer man­age­ment com­pa­nies.

Trencor’s 2008 an­nual re­port showed the Jow­ell fam­ily con­trol­ling JSE-listed Mo­bile In­dus­tries held a 25% stake. Mo­bile, in turn, holds 46% of Trencor, which in turn holds 62,6% of Tex­tainer.

The prob­lem was that Botha had pin­pointed the Mo­bile/Trencor/Tex­tainer struc­ture ac­tu­ally con­tained two fur­ther own­er­ship tiers: Halco Trust and Halco Hold­ings Inc, which sat be­tween Trencor and Tex­tainer. Those tiers weren’t shown or al­luded to in ei­ther the Trencor or Mo­bile an­nual re­ports. Botha gleaned the Halco struc­ture from SEC fil­ings.

Last year Fin­week ar­gued the ex­is­tence of Halco – and the non-dis­clo­sure about that struc­ture – would prob­a­bly worry share­hold­ers, es­pe­cially par­ties who’d called for the dis­man­tling of the Mo­bile con­trol struc­ture as a way to un­lock value for share­hold­ers.

Cer­tainly, the un­cov­er­ing of Halco might have re­in­forced no­tions there was a pre­oc­cu­pa­tion about con­trol over the main op­er­at­ing as­set, Tex­tainer. We also noted that, at the AGM, the di­rec­tors of Mo­bile and Trencor weren’t ter­ri­bly con­vinc­ing in their ex­pla­na­tion of the Halco struc­ture (see “Who the hell is Halco?”; 25 June 2009).

So it will be with some re­lief to share­hold­ers that the lat­est Trencor an­nual re­port makes a spe­cific point of ad­dress­ing the po­si­tion of Halco. Though the Halco struc­ture isn’t re­flected in the group chart, at least di­rec­tors this time con­firmed (al­beit in small print un­der the “in­ter­ests in sig­nif­i­cant sub­sidiaries” ta­ble) that 62,3% of Tex­tainer’s is­sued shares (at 31 De­cem­ber 2009) are owned by Halco Hold­ings Inc.

There are also some “geo­graphic” dis­clo­sures. The re­port re­vealed Halco is in­cor­po­rated in the Bri­tish Vir­gin Is­lands and is wholly owned by the Halco Trust, a trust res­i­dent in Liecht­en­stein.

The way the struc­ture works is that Trencor and cer­tain of its wholly owned South African sub­sidiaries are the nom­i­nated ben­e­fi­cia­ries of the Halco Trust. The “pro­tec­tors” of the Halco Trust are Ce­cil Jow­ell, Neil Jow­ell, Jimmy McQueen, David Nurek and Ed­ward Oblowitz (all di­rec­tors of Trencor).

While the ad­di­tional dis­clo­sure is en­cour­ag­ing, Fin­week still won­ders whether di­rec­tors can jus­tify the re­ten­tion of the Halco struc­ture – which harks back to the days of sanc­tions against SA.

Last year ques­tions were raised about the cur­rent rel­e­vance of the struc­tural legacy – es­pe­cially since there’s al­ready a pyra­mid con­trol struc­ture in place (via Mo­bile In­dus­tries). At that time, Trencor chair­man Neil Jow­ell stressed Halco’s role in pro­tect­ing the un­der­ly­ing as­set – but he also sug­gested Halco held “trade se­crets”, but de­clined to de­tail those.

With no fur­ther de­tail on Halco in the an­nual re­port, per­haps this year’s AGM (set for later this month) will yield more de­tail.

Hope­fully, ex­ec­u­tive di­rec­tors will be urged to make things a lit­tle less opaque about Halco, with Trencor hav­ing re­cently es­tab­lished a “gov­er­nance com­mit­tee” – headed by in­de­pen­dent di­rec­tors David Nurek and Roddy Sparks (the for­mer Old Mu­tual SA CEO).

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