Chris Coombes.   Picture: FINANCIAL MAIL
Chris Coombes. Picture: FINANCIAL MAIL

Sovereign Foods may incur more costs in fending off a takeover bid by rival and shareholder Country Bird Holdings (CBH), as a second bid for the company will come due in September, according to takeover regulations.

On Tuesday, at Sovereign’s presentation of its results for the year to February 2017, the group said R30.7m, or 41.2c per share, was incurred during the year in "corporate activity costs". These included the black economic empowerment transaction and staving off the CBH bid.

Sovereign’s headline earnings per share plunged to a loss of 46.5c from 108.4c in 2016.

Despite revenue rising 25% to R2.2bn, the company reported a total loss for the year of R35.5m from a profit of R81m in 2016, as operating profit fell 89% to R18.5m.

Sovereign CEO Chris Coombes said on Tuesday that the money spent on corporate activity was "indirectly and directly" linked to fending off the CBH transaction.

But he remained tightlipped on the actual amount spent on fighting the takeover bid.

"We prefer just to talk about the group number," he said.

Coombes said this was the company’s toughest year, despite there being no labour disputes or retrenchments.

CBH, which owns 34.1% of Sovereign shares, made an offer to buy all of Sovereign Foods in July 2016. But the bid fell through after the Takeover Regulation Panel, which is associated with the Department of Trade and Industry, found the bid had lapsed.

However, Anthony Clark, an analyst at Vunani Securities, said on Tuesday that he expected CBH to increase its bid from the R9 offer on the table.

"Sovereign will fight tooth and nail to keep the company independent and to save … jobs. They will fight till there’s no fight left in left in them.

"It’s just who they are, no matter what it costs and no matter how much shareholder money they’ve spent.

"This bid is not going to go away and I expect it to be ongoing for another six to nine months," Clark said.

He said that Sovereign had already spent about R30m of shareholders’ money defending itself.

Sovereign, which owns brands such as Country Range, Cater Chicken and Chicken Tizers, will look to deepen its export market for ready-made products to the Middle East as a hedge against the rand.

It already exports the Chicken Tizers brand to Dubai.

The group said that part of its strategy was to materially boost exports, to offset exposure to rand-denominated costs.

"We see exports as quite a big focus for us going forward and from a CBH point of view as well, it should be something that they should tackle," Coombes said.

Coombes said Sovereign wanted to distribute across the whole of the Middle East but exporters had to be certified country by country. He said the trick was to get into a particular country "and get past the essential requirement for that particular country as well".

Clark said the main issue for the future was whether CBH came back with a higher offer.

"How much more will shareholders be willing to take for Sovereign to keep defending itself," he said. "That’s the great unknown."

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