Picture: THINKSTOCK
Picture: THINKSTOCK

DISSENTING shareholders in poultry group Sovereign Food Investments woke up on Friday morning to shocking news.

After initially taking much encouragement from garnering more than 15% support to oppose a controversial empowerment deal at the Uitenhage-based company, the dissenting shareholders were subsequently advised that there had been a miscount in votes cast at the general meeting on Thursday.

The original count — announced by Sovereign chairman Tom Pritchard at the annual general meeting — saw 84.5% of

shareholders eligible to vote in support of the deal and 15.5% in opposition of it.

But a SENS announcement on Friday confirmed the voting figures at 85.4% for the scheme and 14.6% against. The votes on all other associated resolutions also changed to above the 85% mark, except for ordinary resolution one (relating to a specific issue of shares), which garnered support of 84.9%.

A letter to Sovereign shareholders from transfer secretaries Computershare confirmed the votes had been incorrectly tallied. If the dissenting shareholders — which included entities associated with Country Bird Holdings prime mover Kevin James — had achieved 15% in voting against the resolutions around the black economic empowerment scheme, Sovereign would need to seek court approval for the proposed transaction.

Other dissenting shareholders included Opportune Investments, whose principal Chris Logan also represented boutique asset managers Tantalum, 36One and Afrifocus at the general meeting.

Mr Logan said he was disappointed by developments.

The dissenting shareholders registered several concerns about the scheme at the general meeting, most notably that the deal, which includes individuals and executive management, contained little broad-based community participation.

The scheme, which attracted a cash cost of almost R17m, was also regarded as too costly for a company of Sovereign’s size. Sovereign, though, had the support of large institutional investors — namely Prudential, Sanlam, Old Mutual, RECM and Calibre and Personal Trust — for the empowerment scheme.

But Sovereign still faces some deliberation on its empowerment scheme, as dissenting shareholders can opt to exercise their appraisal rights. This would require the company to buy back shares from the dissenting shareholders at a fair value.

Sovereign’s fair value was set at 850c per share in the scheme circular, which could infer a possible buyout cost of much more than R70m.

But Sovereign directors have indicated that the 850c per share fair value should not necessarily be construed as the value of appraisal rights.

After voting at the general meeting, representatives of entities aligned to Mr James, as well as Mr Logan, indicated that they intended exercising their appraisal rights.

The appraisal rights issue has bearing on the proposed empowerment deal.

One of the conditions precedent is that Sovereign would reconsider the deal if more than 5% of shareholders opted to exercise their appraisal rights.