A premium-priced takeover or control bid for a company is certainly a thrill for shareholders. It’s even better, of course, when — on the all too rare occasion — another entity decides that offer still undervalues the company and duly pitches a higher bid. If that sets off a bidding war, shareholders will be rubbing their hands with glee.
I’m not so sure shareholders in MAS PLC, our cover story this week, are feeling completely content — not with property heavyweight Hyprop stepping aside (for the moment) after making an offer. It’s now getting awfully complicated.
The scoreboard does indeed show a roughly 20% gain for MAS shareholders since the first tilt was announced, but that’s still well off the last stated NAV.
The events at MAS show that bidding wars are not without drawbacks. Mud can get slung, skeletons can be dragged out of closets, shareholding groups can get uppity and things can get uncomfortably personal at board level. Sometimes strategic gambits can be interrogated to the point that shareholders are spooked and bail out before the conclusion of any takeover bid ... probably for fear that if the bids fizzle, the share price could be shunted down with vigour. And then, heaven forbid, all the ructions may take management’s eye off the operational ball.
While it’s rare on the JSE to see takeover attempts turn into bidding contests, there have been a few notable incidents over the years. Royal Bafokeng Platinum was pursued by Impala Platinum and Northam Platinum in late 2022, with the former winning out. Adapt IT’s takeover offer from global tech business Volaris spurred an ultimately underwhelming rival bid from microcap telecoms counter Huge Group. Even debt-laden and distressed sugar giant Tongaat Hulett attracted numerous takeover bids (though nothing that could have really salvaged shareholder value).
Possibly the most (in)famous incident took place in the late 1990s when then Rembrandt-controlled diamond outfit Trans Hex Group pitched a takeover merger for the promising Ocean Diamond Mining Holdings (ODM) — which had been hauling regular sacks of gems out of the rough waters off the Namibian coast.
Namibian marine diamond miner Namco then also built up an influential stake in ODM, challenging Trans Hex’s initial grab. The takeover was eventually decided by an opportunistic Christo Wiese, who managed to snaffle enough lines of ODM shares to build a kingmaker stake that was snapped up by Namco at a price well above the inferred value of Trans Hex’s initial offer. Trans Hex went on to acquire less productive assets at Benguela Concessions.
Still, it was a glorious episode for ODM minority shareholders, who must have taken huge heart at their profitable exit when Namco unceremoniously hit the rocks not long after grabbing the ODM operations.
A little later — about a dozen years ago — there was the advance by Country Bird Holdings (CBH) on the then listed Eastern Cape poultry group Sovereign Foods. Sovereign was not exactly enamoured of the thought of being swallowed by a larger rival and found a more suitable perch when private equity firm Capitalworks pitched a more palatable offer to shareholders.
Ironically Capitalworks and Sovereign are back in the corporate action coop in another coup bid, emerging as significant shareholders at agribusiness Quantum — which specialises in poultry, animal feeds and eggs. Capitalworks/Sovereign recently signed a first right of refusal agreement with another large Quantum shareholder, Aristotle, on each other’s shares.
CBH is also a significant shareholder at Quantum and recently signed a similar first right of refusal with another of the bigger Quantum shareholders, Braemar. Something will have to give, sooner rather than later.
I’m sure any proposed board changes would go down as well as salmonella in aspic. Frankly, I would not miss this inevitable showdown in the chicken coop for anything, and I have consequently purchased a small price of admission. You can’t put a price on corporate capers — especially considering the history of animosity among some of the prime movers on the Quantum share register.
Another intriguing event will be the AGM of Rupert-family controlled investment company Reinet. The group’s latest management statement does not make plain what the huge proceeds from the sale of its controlling stake in Pension Insurance Corp (PensCorp) will be mobilised for next year. In fairness, the deal has not been officially clinched so the reticence is perhaps understandable.
After the PensCorp sale more than 80% of Reinet’s portfolio will be cash, with a smattering of fund investments making up the vast bulk of the balance. The discount has ranged from 25% to 30% in recent weeks, and any punter delving into Reinet will be snaffling the cash at a discount as well as getting the remaining portfolio gratis. Not surprisingly, there is a resolution on the AGM agenda to buy back up to 20% of Reinet’s shares.
Share buybacks at a wide discount make sense, but I reckon a good number of minority shareholders are still clamouring for a generous special dividend (unless Reinet, of course, has a compelling pipeline of new acquisitions). One UK-based fund manager commented acerbically: “Crazy that they are now looking at a tender offer or significant buyback programme as a way for shareholders to benefit. Then again, they earn fees on the NAV ... so turkeys don’t vote for Christmas.”
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