The struggle for control
ONE OF THE ASPECTS Senwes will probably have to look at before its listing is its control structure – especially the role played by Senwes Beleggings. To understand that intrigue properly, prospective investors in Senwes need to look deeply into South Africa’s history.
Years ago – especially during the time of the Great Depression of 1930 – the farmers felt Jewish shopkeepers in rural towns were cheating them. They always paid too little for the maize and the skins the farmers brought to them but charged too much for meal.
After the National Party came into power in 1948, with the aid of loaded rural votes, several agricultural control boards were created to ensure farmers would never again be exploited by outsiders. When these control boards began to be scrapped in 1996 it suddenly became fashionable for agricultural co-ops to switch to being companies and to list on the JSE. So farmers again feared outsiders would strike and gain control of the JSE. On the one hand, they liked the idea of the so-called value that listing would bring but were very worried about outsiders gaining control.
The first co-op to risk that move was OTK, the top one in SA, which is based in Mpumalanga in the middle of our best maize-producing region. Initially, things went well. But just when the dominantly Afrikaner board started spending more time squabbling among themselves than managing the OTK, the outsiders (in this case, Allan Gray and friends) struck and took over.
That bit of history is necessary in order to understand the shareholding structure of Senwes and many other co-ops. To make it a bit more difficult for outsiders to take over, at the time when it switched from a co-op to a company, Sentraalwes created the classic structure of Senwes Beleggings and the ordinary operating company, Senwes.
The farmers took some of the shares in Senwes they were entitled to and used them for Senwesbel shares. The articles of association state the Senwesbel shares may only be sold to bona fide farmers in the area. Everything went well and Senwesbel, with its 32% interest in Senwes, effectively controlled the latter. The farmers – the old members of the co-op – still controlled the new company of Senwes, but now via Senwesbel.
Things went so well that by 1998/1999 there was even talk of listing Senwes. But then suddenly everything went haywire. Interest rates climbed, debt-burdened farmers threw in the towel one after the other and Senwes itself looked very unsteady.
The shares in Senwes – and especially in Senwesbel, with their limited trading possibilities – became almost worthless. In 2002, auctioneers Hugo and Terblanche advertised it had been instructed to sell 2,4m Senwesbel and 2,2m Senwes shares. My own offer was 1c/share for the Senwesbel shares and there were jokes going around the market Senwes shares wouldn’t fetch more than 10c each. However, a farmer, Willem Schutte, succeeded in obtaining a court order to halt the auction, bringing an end to that bit of history.
But the extremely low price at which Senwesbel shares were offered at the time attracted attention. Senwes chairman Japie Grobler and three of his fellow directors used the opportunity to buy Senwesbel shares. They also later supported Senwesbel’s rights issue. Now they owned 25% of Senwesbel, which in turn owned 38% of Senwes. Grobler and his fellow directors were firmly in control.
Treacle – a group that in turn became involved, along with an empowerment transaction, and now holds 17% of Senwes – doesn’t like this at all. Wanting to make things sticky for Senwesbel, Grobler and his friends Treacle are now turning to the courts to force them to give 8,3m Senwes shares, which they allegedly obtained too cheaply, back to Senwes or the original owners.
Well, Finweek has no comment about that case. The advice to speculators/investors, of which I’m one, is: don’t go off and buy Senwes shares now for 830c (or even more) in the expectation of a big profit early next year as a result of the listing. The share already looks rather fully priced.