In an unprecedented public statement, RCL Foods, which is majority owned by Remgro, has publicly accused activist shareholder Albie Cilliers of “abusing” the appraisal rights process in the Companies Act in a deal that scored Cilliers about R600,000.
It is almost unheard of for listed companies to release statements on the JSE news platform calling out individual shareholders’ actions.
Meanwhile, Cilliers has slammed Monday’s public statement as “engaging in a naming and shaming exercise, based on a misunderstanding of my valid and legal action”.
“I exercised my rights in terms of law. Why do they attack me in that defamatory statement?”
The Companies Act allows dissenting minority shareholders, in very specific circumstances where shareholding in the company changes, the right to demand that a company pay them fair value for shares they hold. This is an amount which is normally higher than current stock market prices.
This process, technically termed “appraisal rights”, is to protect minority shareholders who may vote against the sale of a company to another firm or the repurchase of more than 5% of shares in some instances. When the minority votes against the specific corporate actions still taking place, shareholders can enter a process of selling their shares back to the company for a fair price.
But RCL Foods, which paid Cilliers R2.2m for his shares giving him a R600,000 profit, said in a statement he has not used the appraisal rights process in the way the law intends. It called his actions “an abuse”, while admitting they were lawful.
This is not the first time Cilliers, who won a court case on the matter in 2018 and another at the Supreme Court in 2022, has used appraisal rights to make money.
In this particular case, RCL Foods, whose brands include Ouma rusks, Yum Yum peanut butter and Rainbow Chicken, announced in October it was to repurchase shares held by two BEE trusts, as they were unable to repay their debt.
In 2014, RCL Foods had lent two BEE trusts money to buy shares for R17.32. These shares dropped in value and the BEE schemes’ debt exceeded their assets.
As part of the transaction to close the indebted BEE schemes, RCL was legally required to obtain an independent opinion on the fair value of its shares. Independent firm BDO valued the shares at R18.08. This is not the stock market value, but estimated value based on the business assets.
In December, shareholders had to vote on the repurchase of BEE shares by RCL Foods in a deal that cost the firm R230m. Cilliers bought 150,000 shares on the last day he could to allow him to vote on the BEE deal, according to RCL Foods.
The price of the shares at close that day was R10.20, the firm said.
In December, he then voted against the repurchase of BEE shares, making him a dissenting shareholder. More than 99.9% of shareholders voted in favour of the repurchase. The move allowed him in law to “exercise his appraisal rights”. This meant he could insist that as a dissenting minority shareholder, RCL pay him for his shares at fair value.
While fair value was just more than R18.08 in the expert opinion, after negotiations the firm bought his shares back at R14.69 each in a deal worth R2.2m, the company said. According to RCL Foods, Cilliers made about R600,000 profit. He admits to making a profit.
On Monday RCL Foods said only Cilliers benefited from the R230m deal to dissolve its BEE trusts, at a cost to the company and shareholders. He was abusing a process designed to protect dissenting shareholders.
The company added he has done this a few times. RCL said in some cases he became a shareholder after the corporate action had begun and there was a fair and reasonable legal opinion setting out the value of the shares — more than the stock market value.
Cilliers then bought shares, voted against the proposed corporate action, became a legally dissenting shareholder and demanded to be paid a higher price for his shares as per the legal opinion.
“Although this conduct is not unlawful, the company is of the view that enabling strategies such as those executed in this instance, could not have been the intention of the appraisal rights remedy in the Companies Act,” RCL said.
Cilliers has won court cases on this issue. In 2018, the high court in Cape Town ruled in his favour and found it did not matter at what point in time the shareholder bought their shares. A Supreme Court of Appeal judgment in 2022 also found doing what he did was lawful.
“I am acting within the law, within my rights,” he said. He accepted an offer below the fair value of R18.08. “They made me an offer way below fair value and now they attack me in that defamatory statement. This is settled law in SA.”
The RCL Foods share price closed down 5% at R12.29 on Monday.
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