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Cape Town - The share price of Pioneer Foods, which has shown remarkable resilience in the face of an ongoing collusion controversy, finally flopped on Wednesday.
In recent weeks Pioneer's shares have doggedly remained above the 3 900c mark - even during a period of strong criticism over the way the group's executives responded to an investigation by the competition authorities into alleged bread price-fixing.
At the close of trading on Wednesday, Pioneer shares had fallen by over 6% to settle at 3 612c on a day that most of the JSE's main indices were up. The value of trade in Pioneer shares was about R5.6m.
A market watcher said the collective weight of "competition matters" had finally knocked the support out from under Pioneer.
He said the worst-case scenario, in terms of fines, would be devastating for Pioneer - probably requiring the company to go to shareholders to raise fresh capital or even sell off assets.
"Judging by the volumes today it seems that some shareholders finally lost their nerve. Trade in Pioneer shares in the next few days could be telling."
Sentiment for Pioneer was threatened earlier this month when the Competition Commission asked the Appeal Court to fine Pioneer R1.5bn for its role in fixing the price of bread.
Initially, Pioneer looked set to be fined an amount equivalent to 10% of total group turnover for the 2006 financial year. The recommended fine of R195m represented 10% of turnover for Pioneer's bakery division Sasko.
More recently, the Competition Commission fingered Pioneer after an investigation into alleged collusion in the local wheat milling market.
The commission has asked the tribunal to impose an administrative penalty of 10% of annual turnover for the 2009 financial year on the firms accused of collusion.
Pioneer generated turnover of R16.3bn in the year to end-September 2009, which infers an administrative penalty of R1.6bn.
Unlike its defiant stance in the bread-fixing investigation, Pioneer has indicated a willingness to cooperate with the competition authorities in the wheat milling matter.
According to a recently released cautionary, Pioneer "wants to resolve the milling and other matters through cooperation with the commission, and without recourse to proceedings before the Competition Tribunal, if possible."
Pioneer has already met with the commission in this regard. The company argued that the administrative penalty in the milling matter may be adjusted lower, depending on the outcome of continuing negotiations with the commission.
- Fin24.com
