Say hello to Halco
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).