Plan set for court scrutiny

ed for or against the scheme — or didn’t even attend the meeting — to have a say in the matter.

This would be a much more encouraging development were it not for the lack of clarity about who has to carry the legal costs attached to such action.

When it confirmed, for the purposes of the court, that it would be implementing the buyback by way of a scheme of arrangement, API stated that any party opposing the court application for approval of the scheme would pay the costs of the application.

Many of the 29% of preference shareholders who did not attend last month’s meeting to vote on the proposal were unaware of API’S plans.

With years of no dividend payments they had assumed their only returns would be on the eventual repurchase, which in the case of preference shares has always been at face value.

The R37.50 market price reflected the nonpayment of dividends and, with management confirming there would be no dividend payments in the years ahead, there was no prospect of an improvement in the market price.

The court action gives these longsuffering, silent preference shareholders an opportunity to have a say, though the uncertainty around legal costs might discourage them.

It’s important to point out that 76.75% of the preference shareholders attending last month’s meeting did actually vote in support of the buyback. A large chunk of that vote came from preference shareholders who also held ordinary shares and so stood to be net beneficiaries.

By confirming it is going the scheme route, API has rendered redundant the application Cilliers made to the court on the very same day. Cilliers wanted the court to confirm his appraisal rights in the event API abandoned the scheme and opted for the voluntary buyback.

Cilliers says he was determined to ensure his rights were protected, whichever option API pursued, and was prepared to incur the inevitably hefty legal expenses involved.

Though no longer pertinent, Cilliers’ court papers provide a chilling perspective of the transaction and highlight a number of concerns about the mechanics of the process.

At the very least the JSE needs to explain why it allowed investors who appear to be related parties to vote on the deal.

And much as there is a profound need for private equity firms that are black owned and controlled, the PIC should not show itself so willing to promote this at any cost.