Sovereign turns to tribunal to block vote
by Ann Crotty,
2016-03-14 06:51:41.0
THE battle for control of Sovereign Foods took another bizarre turn last week, when the Sovereign board applied to the Competition Tribunal to prevent one of its dissenting minority shareholders Country Bird from voting at a shareholders’ meeting on March 29.
The meeting has been called to vote on a broad-based black economic empowerment (BBBEE) deal that will secure control of Sovereign in the hands of management and a number of black investors. Sovereign wants the tribunal hearing to be held on Tuesday next week.
Sovereign claims Country Bird and connected parties have a stake of just less than 15%, and are building this ahead of the meeting in order to block a second attempt to gain approval for the BBBEE scheme.
If it does succeed in blocking the resolutions, Sovereign says this will prove that Country Bird has effective control over Sovereign, and that it acquired this without approval from the competition authorities.
Sovereign says to stop this contravention of competition law, the tribunal must prohibit Country Bird and related parties from voting at the meeting.
Vunani’s Anthony Jenkins is one of the few analysts to speak out about the proposed BBBEE deal. In his latest note, he described the proposal as a self-protection mechanism for Sovereign management.
"Let’s get the facts out there. Of the 28% BBBEE Sovereign is attempting to put in place, 45% of the entire structure will be owned by white Sovereign management," he said.
He described the 28% stake as a negative control block that would see management secure its well-paid fiefdom and prevent any party from trying to acquire control of the business.
In its plea to the tribunal, Sovereign does not quite claim that Country Bird is stalking it, but does suggest its intentions are destructive and recounts a previous attempt to interfere with the company. In late 2008 and early 2009 Country Bird, which was listed at the time, but has since delisted, built up a stake of 23% in Sovereign and indicated it might make an offer to acquire control.
At the time, Country Bird’s move was prompted by Sovereign’s plans to merge with Afgri in a bid to get scale and secure control of Sovereign in supposedly friendly hands.
After Country Bird announced it had a 23% stake and its possible offer would not include Afgri, this scuppered the Afgri deal, but did not stop the Sovereign board from issuing more shares to a select group of shareholders. This offer did not include Country Bird.
In February 2010, Country Bird announced it was selling its entire Sovereign stake.
This left Sovereign management to run the company without distraction. For the next five years, management produced largely mediocre results, while rewarding themselves with attractive remuneration packages — all under the institutional shareholders’ watchful eye.
Plans for the top executive team to take up a 17% stake in the company in a few years, as part of its bonus, were particularly irksome. That has now been folded into a proposal to introduce a BBBEE shareholder into the group.
The combined BBBEE/executive management stake would be a controlling 28%.
Picture: ISTOCK
THE battle for control of Sovereign Foods took another bizarre turn last week, when the Sovereign board applied to the Competition Tribunal to prevent one of its dissenting minority shareholders Country Bird from voting at a shareholders’ meeting on March 29.
The meeting has been called to vote on a broad-based black economic empowerment (BBBEE) deal that will secure control of Sovereign in the hands of management and a number of black investors. Sovereign wants the tribunal hearing to be held on Tuesday next week.
Sovereign claims Country Bird and connected parties have a stake of just less than 15%, and are building this ahead of the meeting in order to block a second attempt to gain approval for the BBBEE scheme.
If it does succeed in blocking the resolutions, Sovereign says this will prove that Country Bird has effective control over Sovereign, and that it acquired this without approval from the competition authorities.
Sovereign says to stop this contravention of competition law, the tribunal must prohibit Country Bird and related parties from voting at the meeting.
Vunani’s Anthony Jenkins is one of the few analysts to speak out about the proposed BBBEE deal. In his latest note, he described the proposal as a self-protection mechanism for Sovereign management.
"Let’s get the facts out there. Of the 28% BBBEE Sovereign is attempting to put in place, 45% of the entire structure will be owned by white Sovereign management," he said.
He described the 28% stake as a negative control block that would see management secure its well-paid fiefdom and prevent any party from trying to acquire control of the business.
In its plea to the tribunal, Sovereign does not quite claim that Country Bird is stalking it, but does suggest its intentions are destructive and recounts a previous attempt to interfere with the company. In late 2008 and early 2009 Country Bird, which was listed at the time, but has since delisted, built up a stake of 23% in Sovereign and indicated it might make an offer to acquire control.
At the time, Country Bird’s move was prompted by Sovereign’s plans to merge with Afgri in a bid to get scale and secure control of Sovereign in supposedly friendly hands.
After Country Bird announced it had a 23% stake and its possible offer would not include Afgri, this scuppered the Afgri deal, but did not stop the Sovereign board from issuing more shares to a select group of shareholders. This offer did not include Country Bird.
In February 2010, Country Bird announced it was selling its entire Sovereign stake.
This left Sovereign management to run the company without distraction. For the next five years, management produced largely mediocre results, while rewarding themselves with attractive remuneration packages — all under the institutional shareholders’ watchful eye.
Plans for the top executive team to take up a 17% stake in the company in a few years, as part of its bonus, were particularly irksome. That has now been folded into a proposal to introduce a BBBEE shareholder into the group.
The combined BBBEE/executive management stake would be a controlling 28%.
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