Shoprite gets Allan Gray approval

26 January, 2007 at 10:20 am | Posted in Companies | Leave a comment

Shoprite chairman Christo Wiese may have secured majority shareholder support for the private equity buyout of the company after a key investor, Allan Gray, said yesterday that it had came on board.
Allan Gray, previously the most vocal opponent of the private equity deal, is the largest shareholder in the company, with a 26.5 percent stake. Its decision comes after the private equity group increased its offer of R26 for each Shoprite share to R28 a share.

Apart from owning 15.4 percent of ordinary Shoprite Holdings shares, Wiese has a further 27.9 percent voting block through his B shares, which have voting rights but hold no economic value. But he may not have to use the B shares following Allan Gray’s decision to lend its weight to the upwardly revised offer. Yesterday Brait Private Equity, which is leading the buyout and delisting of the supermarket group, also announced plans to relist a limited portion of the company, known as Listco, on the JSE.

Fund managers previously complained that they would have no opportunity to carry on owning the limited portion of shares available in the new privately held company. This was because, in general, pension funds and unit trusts are not able to own stakes in unlisted entities. But yesterday Allan Gray gave irrevocable support, dependent on Listco being allowed to list after the takeover. If approved, Listco will own less than 20 percent of the new unlisted Shoprite.

Allan Gray portfolio manager Delphine Govender said she now supported the deal because the new offer price better reflected the value of the company and because private investors would still have the choice to continue having some investment in Shoprite. Govender said that under the revised deal, although Wiese still had the B shares at his disposal, he was no longer benefiting unfairly from them.

The deal now has irrevocable support of 15.4 percent from Wiese, 2.8 percent from Old Mutual, 2.7 percent from the Public Investment Corporation (PIC) and the conditional 26.5 percent support from Allan Gray. In addition, the PIC has indicated it will vote in favour of the deal with an additional 6.4 percent tranche it controls, giving total ordinary shareholder support of 53.8 percent. In terms of the deal, only 50 percent plus one share is required.

But Coronation Fund Managers investment analyst Quinton Ivan did not believe it was a done deal as the Securities Regulation Panel (SRP) still had to rule on whether Wiese was a related party. The SRP has received objections and if it rules that Wiese is a related party, he will not be able to vote on the takeover. Ivan believed that the R28 offer still undervalued the company, which was “in a sweet spot” with good earnings growth.

Shoprite shares closed 0.18 percent higher at R26.95. The food and drug retailers sector slipped 0.03 percent.



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