HomeBusiness DigestRumours fly over rival KWV bid

Rumours fly over rival KWV bid

CAPE investment circles are starting to buzz with rumours that new approaches have been made to KWV Holdings with a view to buying out or taking an influential stake in the Paarl-based liquor icon.

Earlier this week, Paarl-based consumer brands giant Pioneer Food Group pitched a 1 200 cents per share offer (comprising a cash portion and a smaller scrip portion) to KWV shareholders.
On Wednesday evening, Fin24 was tipped off that a specialist liquor company with a global footprint was interested in making an approach to KWV shareholders.
Sources in the wine industry were adamant an approach had been made to KWV, and were surprised that this had not been disclosed to shareholders.
On Wednesday evening, KWV chairperson Thys du Toit told Fin24: “I unfortunately (at the moment) cannot comment.”
Meanwhile, Fin24 was also told that certain KWV shareholders were desperately seeking a white knight to make an alternative pitch —  with names like Johann Rupert/Remgro and Hosken Consolidated Investments mentioned.
It is highly unlikely that Rupert/Remgro could be roped in as a white knight at KWV, because Remgro already holds an influential stake in Stellenbosch-based liquor company Distell.
The HCI angle is perhaps more intriguing. HCI, as its track record of deals over the last decade will show, is certainly capable of making surprise investments.
The big question, of course, is whether these rumours have any substance; or whether they are just mischievous utterances aimed at perhaps forcing a higher offer from Pioneer.
Pioneer’s offer has already been rejected as too low from various shareholding quarters. It seems, at this juncture, that any concerted resistance to the Pioneer offer (which has not been finalised yet) hinges on empowerment shareholder Withmore.
If Withmore resists, presumably other shareholders — including a large contingent of traditional farmer shareholders — could rally around a united front.
It is understood that KWV’s major shareholder Zeder Investments (which is also indirectly the major shareholder in Pioneer Foods) will accept the Pioneer offer.
Chris Logan of Opportune Investments has slammed the Pioneer offer as derisory.
He says that KWV reported earnings of 83c/share in the past financial year, but that a presentation at a recent annual general meeting inferred earnings of 300c/share by 2014.
Logan reckons KWV, which has only recently managed an operational turnaround, could still increase productivity and reduce costs as well as reap the benefits of the appointment of four high-calibre brand directors.
“Using an earnings multiple of eight times, this forecast suggests a target price 2 400c/share — which is double the Pioneer offer.”
Logan, however, sees an upside from Pioneer’s bid.
“What stands out is that Pioneer’s bid has the potential to be a powerful catalyst for KWV.”
He reckons if Pioneer’s advances are successfully seen off, the developments could spark sharpen the operational focus at KWV.
“Prior examples would include Nedcor’s bid for Standard Bank and Investec’s bid for BOE. In both cases, the unsuccessful bid saw the targeted companies getting a wake-up call, and outperforming their peers in ensuing years.”— Fin24

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