How Nigerian mogul outsmarted SA global food giant

THERE’S a very good reason why Nigeria’s Aliko Dangote is Africa’s richest person — he knows when to sell assets and how to extract a massive goodwill payment for a business in trouble.

In September 2012, Dangote sold a 63% stake in Dangote Flour Mills to Tiger Brands. At the time, Dangote Industries told its shareholders that the sale was part of its “going forward strategies” aimed at delivering longterm value for its shareholders.

With the benefit of hindsight, this corporate-speak obviously meant “we need to dump this and get a ridiculously high price in the process”.

Even as it handed over the R1.5-billion, Tiger Brands acknowledged the Nigerian business was underperforming, but believed its excellent management team would put it right and in no time generate loads of profit. Given the optimism, it was a bit disappointing when financial 2013 results revealed no sign of a turnaround.

But CEO Peter Matlare said management had “started doing the right things with Dangote”, raising the question: why had they been doing the wrong things?

At the time Matlare referred to encouraging early indicators but these remained invisible at the time of the February AGM.

Making matters worse was that, in terms of the initial transaction, Tiger was recently obliged to purchase an additional 6.6% from Dangote shareholders.

And then this week came the grim, but in some circles not unexpected, news that Tiger was writing off the R849-million of goodwill relating to the Dangote acquisition.

That the South African food giant was prepared to pay such a steep goodwill premium on a business it knew was flawed does give substance to recent media speculation that due-diligence processes had not been followed.

Some Tiger shareholders may now be wondering how appropriate the latest batch of generous share awards to the group’s executives was.

At least we now know why Matlare was unable to attend Barclays’ Africa board meetings.

SAPPI

Does anyone else get an overwhelming sense of deja vu every time they peruse a set of Sappi results? For more than 20 years the company has reported results that are very occasionally good, sometimes appalling but generally disappointing. The most common characteristic of a set of Sappi results is the promise of better things to come.

Currently, shareholders are being told things will get better when the crippling debt burden has been reduced. Not long ago, shareholders were promised things would get better if Sappi borrowed a load of money to buy four new mills.

Way back in the ’80s, the domineering CEO, Eugene van As, managed to persuade the shareholders, led by Sanlam, to back an outrageously ambitious acquisition plan. It was designed to secure long-term sustainable profit growth by acquiring pulp and paper assets across the globe, which would protect shareholders from the volatility of the South African market.

Hugely expensive assets were bought, but sustainable profit growth was elusive as some or other problem in some or other part of the globe seemed inevitably to hold back perfor- mance. This reality didn’t stop management from constantly encouraging shareholders to believe strong growth was around the corner. And apparently it still is.

NEDBANK

Nedbank took a firm stand for tradition this week, announcing the bare bones of the results of its annual general meeting, “. . . all the ordinary resolutions and special resolutions were passed by the requisite majority of shareholders”.

In the political world, that is akin to President Jacob Zuma saying “we won the election and the DA came second”. End of story. Nothing about how many people actually voted for each party and how many abstained.

We demand decent levels of disclosure from our politicians, so why don’t companies of Nedbank’s size and importance bother to provide shareholders — and broader stakeholder groups — with useful information?

Barclays Africa, which also has a UK-controlling shareholder, treats its stakeholders with a bit more respect by providing full disclosure. Without these details it’s impossible for even shareholders to determine the extent of shareholder engagement at an AGM, which is after all the only opportunity they have to engage with management.

BANKS

What a bunch of ungrateful wretches banks are on a global scale. PwC’s latest Banking Banana Skins survey reveals that the main worries of bankers across the globe relate to politicians and regulation.

They obviously don’t realise that politicians have sheltered them from the raging masses, and that increasing levels of clumsy regulations protect them from the more sensible option of breaking them up.

And, on the subject of banks, the big question this week: is African Bank another Saambou circa 2002 or Old Mutual circa 2010?