Cheers and jeers at Capevin

Cape Town - Tensions bristled at the first annual general meeting for Capevin Holdings, formerly KWV Limited, with director Chris Otto having to keep his cool under a barrage of questions around the independence of directors from shareholder activist Theo Botha.

It was clear Otto, a co-founder of PSG, and Botha had very different opinions on the independence of directors. The former highlighted the fact that certain of the directors in question had a track record of looking after the interests of minority shareholders and the latter sticking to the guidelines outlined in the King Code on corporate governance.

During the AGM, held on Friday in Paarl, Botha questioned whether the recently appointed Capevin board could be considered truly independent when the board comprised directors that were aligned to the company's main shareholders.

Capevin's biggest three shareholders are PSG-controlled Zeder Investments, wine farming entity VinPro and empowerment partner Phetogo. Collectively these entities control 52% of Capevin.

The board members are Khutsu Mampeule (aligned with Phetogo) and Abri Botha (VinPro) as well as PSG-aligned directors like JJ Mouton (the son of PSG chairperson Jannie Mouton) and Chris Otto (also a director of Zeder).

Botha said it appeared to be a takeover of Capevin, and was consequently keen to understand who would be looking after the interests of farmers and other minority shareholders.

Botha also seemed concerned about related party issues, pointing out that Phetogo had recently sold a portion of its shares in Capevin to PSG-controlled Zeder to get sufficient funds to subscribe for shares in KWV's rights issue.

Otto stressed that directors would concentrate on growing value for shareholders, adding that the sole purpose of Capevin - which holds a 15% stake in JSE-listed Distell as its sole investment - was to distribute dividends as efficiently as possible to shareholders.

"We are working for all shareholders, and are not working in concert with one another."

Botha argued, though, that the board of directors did not meet the definition of independent as suggested in the King Code on corporate governance.

Otto responded: "You have your definition of 'independent' and I have mine. We are fiercely independent... and we have always built businesses on excellent corporate governance."

Otto reckoned it was often the so-called independent non-executives who would go on junkets "to watch World Cups".

Botha also questioned how the board Capevin board was elected, asking why the appointment of directors was not subject to a shareholders' resolution.

An exasperated Otto offered to put the entire board up for re-election. "We can put all the directors up for re-election if you please. We seem to be going tit-for-tat... what's your point Mr. Botha?"

At that point a farmer angrily interjected, slamming Otto's suggestion to put the Capevin board up for re-election as "extremely arrogant".

"You make these suggestions, but you will simply outvote us. This is an incestuous relationship... the small guys end up doing what the big guys say."

Speaking to Fin24.com after the AGM, Botha said that it seemed a small group of individuals dominated the board decision making.

Unlocking value

On a less contentious note, well-known value investor Chris Logan (of Opportune Investments) congratulated Capevin on the long awaited restructuring of the old KWV Limited.

But Logan queried whether unlisted Capevin, which trades at a sizeable discount to its see-through value, would consider buying back its own shares.

Otto said this was highly unlikely, reiterating that Capevin's "duty" was to distribute all monies received from the Distell investment to shareholders at minimal cost.

Otto conceded that he did not know how to unlock the R500m discount in Capevin.

He pointed out that while investors could argue there was a control premium on the Distell shares held by Capevin Investments/Remgro, there were pre-emptive rights in place. These included SABMiller, which holds a 28.9% stake in Distell.

"It takes patience. It took us 30 years to get where we are today. But we intend taking shareholders along with us. There is certainly a wonderful opportunity to buy Capevin shares, even though I can't give you a timetable on the value unlocking process..."

- Fin24.com