Fowl play?
The AGM of poultry group Sovereign Food Investments in Port Elizabeth last week addressed — or rather raised — an issue that may have puzzled market watchers – the spurt in the company’s share price in the months ahead of the private equity takeover bid by Capitalworks.
Since late March Sovereign’s shares have trekked steadily northwards – increasing by more than 30%. In late July there were some eyecatching spikes in the share price from R10.85 to R13, and then again in early August from R11 to R12.50.
Independent investment manager Stephen Pratt noted the difficulty in acquiring parcels of Sovereign shares in recent months — but added that at the same time large block trades had been executed, sometimes at lower prices to his bids in the market. In essence, Pratt contended that over the past six months virtually all transactions of any substantial value transacted off-market were block trades and were often outside normal trading hours. Pratt highlighted a curious turn of events when he instructed a broker to attempt to acquire Sovereign shares from an institutional investor in order to execute a block trade.
“The response was that the institution was not a seller — but that the first option would have been to sell their shares to management because we have an agreement with them.”
The suggestion, from Pratt, was that such trades were aimed at protecting Sovereign — which has also been fending off a hostile advance by rival Country Bird Holdings (CBH), which has built a 34.1% stake in the company.
Pratt asked whether Sovereign executives were comfortable with an arrangement where a shareholder had had an engagement with management around possible share dealings. Pratt’s questions clearly ruffled feathers, since the Sovereign executives huddled for a consultation before answering. Sovereign CEO Chris Coombes fobbed off the issue by claiming it was not the executives’ job to regulate who shareholders sold to. But Pratt’s pointed conclusion says it all: “The share price determines the value of the company.”
A long cool drink
Brian Joffe’s tilt — via his new investment company Long4life — at the local beverages sector will have made shareholders in plastics packaging group Bowler Metcalf sit up and take notice. Bowcalf, a perennially profitable packager, is suffering from increasingly bitter perceptions around its major shareholding in unlisted soft-drink bottler Softbev. Softbev is a sizeable operation with annual sales of more than R1bn and some interesting brands in Jive and Cooee — not to mention the Pepsi bottling contract.
I’m not sure Long4life will be keen to slurp up Softbev — remembering that scale in the beverages sector can sometimes bring you unwanted attention from big competitors. But considering just how beaten down the share price of Bowcalf is, maybe Long4life may view the entire group as a more interesting opportunity? Admittedly, Long4life pitches at the broader lifestyle sector, but Bowcalf’s focus is on packaging for shampoo, cosmetics and household products. Readers may recall Joffe’s Bidvest once tilting at Nampak. How differently that story might have turned out.
Twilight at African Dawn
African Dawn Capital — once a mighty (but short-lived) microlender — will now need to return to the drawing board to a transaction that justifies its continued listing on the JSE. Last week the company announced that venture capital specialist Knife Capital will be sold for just R3.6m.
Officially, though not too convincingly, the company’s strategy is to be an active investment holding company while the key underlying strategy of Knife is to operate as a venture capital fund manager. Afdawn’s strategy is to invest directly in operational businesses — which will be an interesting exercise considering itsbalance sheet is not exactly muscular. It’s a small comfort that Afdawn will retain a 50% shareholding in Knife-managed venture capital accelerator Grindstone.
Feathers were ruffled at the annual general meeting of poultry group Sovereign Food Investments