Country Bird Holdings (CBH) had no intention to walk away from Sovereign Foods and would resume its efforts to acquire a controlling stake of the company in September, group CEO Marthinus Stander said on Wednesday.
His comments followed an unexpected 7% slump in Sovereign’s share price on Wednesday morning to a low of R7.25 from the previous close of R7.85. Other chicken producers Astral and RC remained firm.
The fall in Sovereign’s share price, which was in low-volume trade, prompted shareholder activist Chris Logan to call for the board to be replaced. Logan said the board must demonstrate to shareholders how it can at least match the R9-a-share value that CBH is prepared to pay shareholders for Sovereign.
"Instead of doing everything they can to thwart the offer, the Sovereign board should encourage CBH and demand whatever it thinks is a full reflection of the value of the company," he said.
The Takeover Regulation Panel ruled last year that CBH’s offer, made in September, had lapsed and that it could not make another for 12 months.
Stander said this ruling blocks CBH, which already held 34.1% of Sovereign, from acquiring more shares. "If we go over 35%, we trigger a mandatory offer and we’re not allowed to do that until September."
We’re cheaper producers than any European country and if the US doesn’t dump brown chicken meat in the export market, it renders it.
— group CEO Marthinus Stander
In December, Sovereign’s board appealed against the Competition Commission’s approval of a merger with CBH and said such a deal would lead to public interest concerns.
The acquisition of Sovereign would help CBH’s proposed strategy of moving further down the value chain and getting closer to the customer. This strategy will be implemented if there is no reduction in imports as it would shelter CBH from the worst effect of cheap imports. It might also see CBH closing its Mafikeng operation.
Stander disputes charges that SA’s chicken industry is not competitive and is hampered by inefficiencies and high concentration in the food industry.
"We’re cheaper producers than any European country and if the US doesn’t dump brown chicken meat in the export market, it renders it."
Tuesday’s meeting between government, business and labour appears to have held out hope of increased import duties. But Garth Strachan, deputy director-general at the Department of Trade and Industry, said business would have to reciprocate by committing to improve its competitiveness, and that tariffs could not be used to keep prices and profit high at the expense of consumers.
Stander welcomed the meeting, saying it was the "most positive" the industry has had with the government.
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