Picture: ISTOCK
Picture: ISTOCK

Country Bird Holdings (CBH) looks set to abandon its second bitterly fought attempt to get control of Sovereign Foods, with CBH CEO Marthinus Stander expressing concern on Friday about the possible effect of avian flu on Sovereign’s Uitenhage operations.

"We see the avian flu situation as a game changer," said Stander. "We’ve decided to take the R12 and walk away."

In August, Sovereign stunned the market when it announced that private equity firm Capital Works was offering a hefty 33% premium on the R9 offer made by CBH in September 2016.

After building up a 34% stake, CBH was forced to abandon that offer following a transgression of the takeover regulations.

The company was forced to wait 12 months before launching a new bid.

Stander was commenting shortly after Sovereign released a Sens statement informing shareholders that it had detected avian flu at a single layer house on a farm that forms part of its Uitenhage operations.

"Approximately 5,000 birds have been culled, which represents approximately 1% of Uitenhage’s production pipeline," Sovereign said.

It said that its management was taking the appropriate steps and following the prescribed protocols to prevent the avian flu from spreading to other farms.

However, Stander contends it is very difficult to contain an outbreak of avian flu to one section. "There are five layer houses on the affected farm.

"Over the next few days, we will see if they are able to contain the avian flu.

"If they can’t, then 40,000 birds could be affected, which is 10% of their production pipeline," Stander said.

He said the outbreak demonstrated that Sovereign’s Achilles heel was that it did not have its own source of parent bird stock. "Only Rainbow, Astral, Quantum and Country Bird have their own source and when there are problems, we stop supplying to third parties," Stander said.

A spokesman for Sovereign said on Friday that there was no update on the previous day’s Sens announcement.

"We will keep you updated when more information is available," he said.

Stander said the decision to walk away from its battle for Sovereign was not influenced by the Competition Tribunal’s ruling that it would have to notify the commission of its proposed takeover bid. The tribunal’s ruling followed an application by Sovereign to have the conditional merger approval granted by the Competition Commission in November 2016 set aside.

"Central to our finding in this matter is an inherent uncertainty as to what merger the commission approved," the tribunal said.

"Whether it is the acquisition of de jure control by Sovereign — ie an acquisition of 50% plus one share — or the acquisition of de facto control — ie the ability to command a majority in a shareholding meeting."

The tribunal said the commission had 40 business days to decide whether the merger should be approved and, if so, which appropriate conditions, if any, should be attached.

Stander described the tribunal’s ruling as "just a technical concern" and said it was not a big issue.

He said CBH’s decision to walk away had also been influenced by its failure to engage with Capital Works.

"We were going to be a 34% shareholder in a delisted company, but were unable to get to Capital Works to have any sort of meaningful discussion about this," he said.

Business Day was unable to get a response from Capital Works on Friday.

crottya@businesslive.co.za

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