Country Bird offer is becoming tempting

UNLISTED poultry player Country Bird Holdings (CBH) confirmed beyond any doubt that it is in for the long haul at JSE-listed rival Sovereign Foods.

On Tuesday, CBH, which has a 900c per share offer open to Sovereign shareholders, waived a key condition of its takeover bid.

CBH, which technically already speaks for close to 47% of Sovereign’s issued shares, has waived the condition that its takeover deal will only proceed if it gains the support of more than 50% of Sovereign’s shareholders.

The waiver comes just a day before CBH’s offer would have expired. The way it appears to be panning out at Sovereign is that gradually institutional shareholders — perhaps wary of the downswing in the poultry cycle — are viewing CBH’s offer more favourably.

Perhaps most worrying is that at the time of writing, Sovereign had not yet issued a trading update covering the interim period to endAugust. Ominously, Astral Foods, the big bird of the JSE’s poultry sector, issued a particularly dreadful update earlier this week.

What will be worth watching is whether Prudential, the largest institutional shareholder in Sovereign, continues to resist CBH’s advances. To date, RECM & Calibre and Old Mutual have lightened up their holdings in Sovereign. Whatever stake CBH eventually garners in Sovereign, feathers are bound to fly in the boardroom.

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F MEDIA reports are to be believed, it seems there’s little stopping ArcelorMittal SA from acquiring Evraz Highveld Steel and entrenching its already dominant position in the local steel market. What a nightmare that prospect must be for the Department of Trade and Industry.

For most of the 21st century ArcelorMittal SA has been a huge thorn in the department’s side and has done much to thwart its plans to develop SA’s economy. But in a matter of a short few months it seems ArcelorMittal SA has gained something akin to “most-favoured steel producer” status; not least because it is the only steel producer left standing. It is working on a black economic empowerment deal and has agreed to pay the competition authorities R1.5bn in penalties for anticompetitive conduct.

Of course, it is only a matter of time before relations revert to the old-fashioned hostility. By then the global oversupply of steel will have dried up, the global economy will be a little chirpier and ArcelorMittal SA will once more be pondering the delights of import parity pricing.

Which is why we should be relieved that ArcelorMittal SA will have to persuade the competition authorities of the necessity for it to buy the failing Evraz before any such deal can be done.

Fortunately the competition authorities are likely to have enough painful ArcelorMittal SA memories to ensure such an acquisition is not easily approved. Nick Wilson edits Company Comment (wilsonn@bdfm.co.za)

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