Publications
Partners
Nobody likes a control freak. But control is what dominates the corporate world. There are major shareholders, who own the most shares or the highest economic value in a company, and minority shareholders. In most cases both groupings get along fine, as long as the company is being well run, allowing minority shareholders to benefit from their investment. Should there be a conflict of interest, minority shareholders often have a voice to raise objections, regularly seen at annual general meetings.
But control becomes contentious when it’s artificial control. And despite ongoing reform on the JSE and shareholders’ resistance, artificial control is still maintained through the use of pyramid shareholding structures. At its simplest, this is when the owner has the largest or only stake in a passive holding company – a company that serves no other function than to act as a conduit to the operating company below it. The owner’s direct economic stake in the operating company may not be that great, but the owner maintains control through the pyramid structure.
However, most often investors will probably not care if there’s a pyramid in place. They may not even be aware of the structure. Until things start going wrong.
“There’s a growing realisation among investors, whereby they’re linking the poor operating performance of pyramid structures to the controlling shareholders. It’s like a one party state,” says Chris Logan, a director at Opportune Investments. Logan has a special interest in pyramids and played an active minority shareholder role in what ultimately ended up as the collapsing of the Liberty Holdings structure, the vehicle used by Standard Bank to maintain artificial majority control of Liberty Life.
Though definitions of pyramids might differ a little, they evolve around a holding company. It’s instructive that when looking up “pyramid” in The Penguin Dictionary of Economics, it refers you to “holding company”. And after defining a holding company and giving examples of the positive ways such companies are used, it goes on to read: “It is possible for a holding company to control a large number of companies with a combined capital very much greater than its own, since it needs to hold only half or even less of the shares of its subsidiaries. Abuse of this possibility of pyramiding, as it is sometimes called, in now limited by company legislation.”
More than that: pyramids are banned on most developed stock markets. But a few – at least one, following the stricter definition of pyramid – are still on the JSE. We looked at a few possibilities.
Rex Trueform is a pyramid. The listed African & Overseas Enterprises Ltd, investment vehicle for the Shub family, holds a direct 76,2% stake in Rex Trueform.
Altron looks like a pyramid for the Venter family to maintain its 56,6% control of Altech, but it’s not. Altron has other subsidiary holdings besides Altech, including Powertech and Bytes Technology. Typically, a pyramid holding company has nothing else but the controlling stake in an underlying operating company.
RMB Holdings was also considered, mainly because of its 30% holding in FirstRand (which should be raised to 34% in a restructuring next month). But RMB Holdings also has other direct holdings, as does FirstRand. And the whole structure will change markedly next month when its banking and insurance interests are divided and separately listed on the JSE.
Investors and minority shareholders will have a number of points of entry into the group. The three founding directors – GT Ferreira, Laurie Dippenaar and Paul Harris – will still keep their holdings through RMB Holdings but it’s dispersed beyond that. Says GT Ferreira: “RMB Holdings believes the restructuring is in the best interests of all shareholders and will increase investment flexibility substantially.” That doesn’t sound like pyramid talk and the new structure will be hard to define as a pyramid.
But there’s at least one true pyramid on the JSE. There may be a few smaller examples we have overlooked but this is the big one – and probably the last one. It’s a group everybody knows: South Africa’s second largest food retailer, Pick n Pay. At the top is JSE-listed Pick n Pay Holdings. The Ackerman Family Trust owns 48,3% of Pick n Pay Holdings, which owns nothing else but 53,6% of the operating company, Pick n Pay Stores.
What’s possibly significant is that, apart from the Ackermans’ 48,3% stake in Pick n Pay Holdings, the Pick n Pay Employee Share Trust holds 2%. It’s a given that, should the need arise, the Share Trust would act in concert with The Ackerman Family Trust, effectively giving the Ackerman family slightly more than 50% of Pick n Pay Holdings. The combined holdings could be used, for example, to ward off a hostile takeover. Or to block votes by minority shareholders.
“Pick n Pay is the only true pyramid now. It’s immune from protesting minority shareholders – not unlike the old Standard Bank, Liberty Holdings and Liberty Life structure,” says Roy McAlpine. He also played a role as a minority shareholder activist in the collapse of Liberty Holdings. And as the former MD of Liberty Asset Management he knew that group structure extremely well.
However, McAlpine says there’s an important difference between a group headed by an entrepreneur such as Raymond Ackerman and an institutional shareholder like Standard Bank. “Raymond Ackerman started off years ago by buying a few stores. He built it up into a large group and created lots of value for shareholders.”
Shareholder activist Theo Botha has been close to proceedings at Pick n Pay, attending the last AGM with a list of questions. And while that may not necessarily be typical of the owners of a pyramid, some questions were simply dismissed. For example, one of the issues Botha is pursuing is that Pick n Pay Stores has been paying the expenses of Pick n Pay Holdings for a numbers of years. “I’m on a mission to get that money back. It’s not a material thing – I’m not sure, but I think the expenses amount to around R16m – but it’s the principle.”
The AGM is an example of where Botha thinks the Ackermans are abusing the pyramid structure against shareholders who complain. “I asked Gareth Ackerman about the expenses and he said he’d forward it to the board. Then Raymond Ackerman stepped in and said no, we must leave the issue. And that was it. There was nothing further we could do.”
Botha says he can’t understand why the Ackermans want so much control. “Shareholders will continue to complain. The Ackermans must accept responsibility and then start doing things differently. But I don’t think they can.”
McAlpine doesn’t believe the last great pyramid can last too much longer. “The Ackerman pyramid will go – it’s only a matter of time. Shareholder pressure will see an end to it.”
That seems to sum it up. We spoke to a few institutional shareholders in Pick n Pay, including some hedge funds that didn’t want to be named, and the feeling was that shareholder pressure was on the increase and would ultimately see the end of the Pick n Pay pyramid.
But it could be a long fight. All the pyramid examples we’ve looked at are controlled by families, apart from RMB Holdings, though the three founding directors are probably as close to a family as you can get. And it’s not hard to understand that families – some having spent lifetimes building up the family fortune – want to keep control through whatever mechanism possible. But pyramids might not be an option for too much longer, with Pick n Pay providing the grand finale.
Pick n pay
No premium in the pyramid
Last operational results were poor
CAN THE SHAREHOLDING structure of a company affect operational performance? That’s difficult to determine and in most cases it would probably not. But Pick n Pay’s artificial control through a pyramid structure is being called to account, with shareholders claiming it’s affecting operating performance. “Shareholders are concerned about Pick n Pay’s poor operational performance. They believe deconstructing the pyramid would make the group more competitive. There’s also a concern that if performance remains poor, Pick n Pay could be taken over,” says Chris Logan, a director at Opportune Investments.
Just as owner control through a pyramid can be used to ward off a hostile predator, the best protection is good operational performance. That should translate to an appreciating share price – the best protection of all.
Pick n Pay’s most recent financial results (for its first half to end-August 2010) weren’t very inspiring and are even worse when compared with competitors in the retail food industry. Turnover grew by a credible 6% to R25,3bn but profit margins came under pressure, resulting in headline earnings per share dropping by 12%. The group put the results down to the competitive environment and reluctance of over-indebted consumers to spend too much. Critics said Pick n Pay had spent too much developing and redesigning stores, an investment that’s yet to yield results.
It’s quite typical for the share price of holding companies to trade at a discount to operating companies. In the case of Pick n Pay Holdings, the discount to Pick n Pay Stores is roughly 7c/share or, at the market capitalisation level, around R2bn. However, that isn’t out of line with regular holding/operating company share prices, so doesn’t suggest the pyramid structure offers a greater discount.
Where the difference is perhaps more pronounced is when comparing share prices to net asset value. At 1993c/share at the close (17 January), Pick n Pay Holdings was at a discount to NAV of 2409c/share. On the other hand, Pick n Pay Stores closed at 4711c/share, a fair premium to NAV of 4476c/share.
That’s the discount hedge fund managers can exploit and why quite a few hedge funds invest in Pick n Pay, taking short and long positions on two listed companies in the same group. The discount gap is also exploited by traders who sense any possibility of that closing up, as it does occasionally.
Share price performance of the two listed Pick n Pay companies largely track each other. Pick n Pay Holdings has done marginally better, its price increasing by 6,1% over the past six months and 18,8% over the past year. Pick n Pay Stores was up 5,6% over six months and 17,5% for the year, which makes Pick n Pay Holdings the more attractively priced share, on an earnings multiple of 16,9 times and dividend yield of 4,2%. Pick n Pay Stores is on an earnings multiple of 21 times and dividend yield of 3,7%.
If you want to invest in Pick n Pay, it seems better to get into the top structure alongside the Ackermans. However, neither share can be considered cheap and some analysts’ forecasts have marked both as a sell.
Another contentious issue is Australian retailer, Franklins. Pick n Pay now wants to sell Franklins, for around US$183m, to Metcash Trading, an unlisted company and Australia’s third largest food retailer. But the deal is being delayed by the Australian Competition and Consumer Commission, which has started legal proceedings to try and block the proposed sale, saying it’s anti-competitive. The board of Pick n Pay is opposing that.
But some investors – particularly hedge funds – say they were warning Pick n Pay’s board a few years ago to sell Franklins. That fell on deaf ears, they claim. Had Pick n Pay listened, millions of rand could have been saved.
RESPONSE FROM PICK N PAY
Why a family-owned business needs pyramid control
PICK N PAY was founded in the belief that family control was the only way we could ensure the maintenance of the principles that have informed our commercial conduct since 1967. For four decades, family control has protected those values in a business environment where ethical behaviour hasn’t always been the dominant practice.
Throughout the world, family-owned businesses continue to play an important role in the development of economies. In the United States they form the backbone of the American economy. Some 35% of Fortune 500 companies are family-controlled, while family businesses account for 50% of the US’s gross domestic product. They generate 60% of the country’s employment and 78% of all new job creation.
Against that background it’s important to remember why Pick n Pay Holdings was created as a pyramid holding structure in the first place. In 1981, amid rumours that certain business interests were exploring a takeover of a majority of Pick n Pay shares, it was a necessary step in order to prevent a hostile takeover. Consistently high returns to shareholders since then have amply shown the wisdom of that strategy and decision.
Now – 22 years later – Pick n Pay control remains in the hands of the Ackerman family, despite the worldwide decline in large family businesses and despite the numerous disincentives that confront such enterprises. In SA, corporate governance requirements introduced over the past four years have unintentionally erected barriers to the formation and sustainability of big family-owned businesses such as Pick n Pay, with the result there’s a decreasing number of such enterprises listed on the JSE.
Above all, perhaps, family control has enabled us to take the long view when devising strategy, considering plans for expansion and assessing the risks of future investment. That we would have been unable to do had we been restrained by the demands of majority institutional investors or private equity shareholders for immediate returns and short-term benefit.
As far as our Australian operation is concerned, analysts welcomed our initial investment as a good rand hedge. With the exactness of hindsight we could have invested elsewhere. The decision to stay in Australia was taken by the board at the time, and I respect that decision. However, a strategic review undertaken during my first few months as chairman made it clear to the board that an exit strategy was the best option.
As a matter of record, I need to point out family entities have greater than 50% of Pick n Pay Holdings and the family is not dependent on the Pick n Pay Share Trust to vote in its favour on any issue requiring a simple majority.
GARETH ACKERMAN
Chairman of Pick n Pay Holdings
TRENCOR AND MOBILE
Families aren’t forced to be pyramids
TRENCOR AND MOBILE Industries were, until late last year, a classic pyramid structure. Top-listed holding company was Mobile, with a 46,25% shareholding in Trencor, which in turn holds 61,8% of New York Stock Exchange-listed Textainer.
At the very top was the Jowell family, holding 25,1% of Mobile. And not unlike Pick n Pay – where father Raymond Ackerman and son Gareth chair the respective listed holding companies (and swapped chairman positions last year) – Cecil Jowell is chairman of Mobile and Neil Jowell chairman of Trencor.
But following various board meetings – and no doubt much reflection – Trencor and Mobile decided to unbundle the entire 46,25% holding Mobile had in Trencor, wrapping up the pyramid structure. The deal involved a substantial share buyback by Trencor and negotiations with the JSE, which ruled that despite the unbundled stake Mobile was still an associate of the Neil and Cecil Jowell trusts. However, the issue was resolved with the JSE and early this year Mobile and Trencor told shareholders all conditions precedent had been met and the unbundling would be implemented – which is taking place about now and into the first week of February.
In terms of the unbundling, Mobile shareholders will receive 8,117 Trencor shares for every 100 Mobile shares held, based on a price a little higher than the current 3500c/share Trencor was trading at last week.
What the exercise demonstrates is that pyramid structures are unpopular, even with some of the companies using them. It also shows family control doesn’t have to be protected through artificial control. It may be a little daunting for a family to let go but, ultimately, control is protected by good operating and financial results.
The history of voluntary dismantling of pyramids also goes back a number of years, the earliest example we were told about being Brian Joffe and Bidvest. In its early days – it was a classic pyramid, with control retained through top-listed holding company Bidcorp. But Joffe decided to get rid of the structure, apparently because he felt it was the right thing to do.
But control becomes contentious when it’s artificial control. And despite ongoing reform on the JSE and shareholders’ resistance, artificial control is still maintained through the use of pyramid shareholding structures. At its simplest, this is when the owner has the largest or only stake in a passive holding company – a company that serves no other function than to act as a conduit to the operating company below it. The owner’s direct economic stake in the operating company may not be that great, but the owner maintains control through the pyramid structure.
However, most often investors will probably not care if there’s a pyramid in place. They may not even be aware of the structure. Until things start going wrong.
“There’s a growing realisation among investors, whereby they’re linking the poor operating performance of pyramid structures to the controlling shareholders. It’s like a one party state,” says Chris Logan, a director at Opportune Investments. Logan has a special interest in pyramids and played an active minority shareholder role in what ultimately ended up as the collapsing of the Liberty Holdings structure, the vehicle used by Standard Bank to maintain artificial majority control of Liberty Life.
Though definitions of pyramids might differ a little, they evolve around a holding company. It’s instructive that when looking up “pyramid” in The Penguin Dictionary of Economics, it refers you to “holding company”. And after defining a holding company and giving examples of the positive ways such companies are used, it goes on to read: “It is possible for a holding company to control a large number of companies with a combined capital very much greater than its own, since it needs to hold only half or even less of the shares of its subsidiaries. Abuse of this possibility of pyramiding, as it is sometimes called, in now limited by company legislation.”
More than that: pyramids are banned on most developed stock markets. But a few – at least one, following the stricter definition of pyramid – are still on the JSE. We looked at a few possibilities.
Rex Trueform is a pyramid. The listed African & Overseas Enterprises Ltd, investment vehicle for the Shub family, holds a direct 76,2% stake in Rex Trueform.
Altron looks like a pyramid for the Venter family to maintain its 56,6% control of Altech, but it’s not. Altron has other subsidiary holdings besides Altech, including Powertech and Bytes Technology. Typically, a pyramid holding company has nothing else but the controlling stake in an underlying operating company.
RMB Holdings was also considered, mainly because of its 30% holding in FirstRand (which should be raised to 34% in a restructuring next month). But RMB Holdings also has other direct holdings, as does FirstRand. And the whole structure will change markedly next month when its banking and insurance interests are divided and separately listed on the JSE.
Investors and minority shareholders will have a number of points of entry into the group. The three founding directors – GT Ferreira, Laurie Dippenaar and Paul Harris – will still keep their holdings through RMB Holdings but it’s dispersed beyond that. Says GT Ferreira: “RMB Holdings believes the restructuring is in the best interests of all shareholders and will increase investment flexibility substantially.” That doesn’t sound like pyramid talk and the new structure will be hard to define as a pyramid.
But there’s at least one true pyramid on the JSE. There may be a few smaller examples we have overlooked but this is the big one – and probably the last one. It’s a group everybody knows: South Africa’s second largest food retailer, Pick n Pay. At the top is JSE-listed Pick n Pay Holdings. The Ackerman Family Trust owns 48,3% of Pick n Pay Holdings, which owns nothing else but 53,6% of the operating company, Pick n Pay Stores.
What’s possibly significant is that, apart from the Ackermans’ 48,3% stake in Pick n Pay Holdings, the Pick n Pay Employee Share Trust holds 2%. It’s a given that, should the need arise, the Share Trust would act in concert with The Ackerman Family Trust, effectively giving the Ackerman family slightly more than 50% of Pick n Pay Holdings. The combined holdings could be used, for example, to ward off a hostile takeover. Or to block votes by minority shareholders.
“Pick n Pay is the only true pyramid now. It’s immune from protesting minority shareholders – not unlike the old Standard Bank, Liberty Holdings and Liberty Life structure,” says Roy McAlpine. He also played a role as a minority shareholder activist in the collapse of Liberty Holdings. And as the former MD of Liberty Asset Management he knew that group structure extremely well.
However, McAlpine says there’s an important difference between a group headed by an entrepreneur such as Raymond Ackerman and an institutional shareholder like Standard Bank. “Raymond Ackerman started off years ago by buying a few stores. He built it up into a large group and created lots of value for shareholders.”
Shareholder activist Theo Botha has been close to proceedings at Pick n Pay, attending the last AGM with a list of questions. And while that may not necessarily be typical of the owners of a pyramid, some questions were simply dismissed. For example, one of the issues Botha is pursuing is that Pick n Pay Stores has been paying the expenses of Pick n Pay Holdings for a numbers of years. “I’m on a mission to get that money back. It’s not a material thing – I’m not sure, but I think the expenses amount to around R16m – but it’s the principle.”
The AGM is an example of where Botha thinks the Ackermans are abusing the pyramid structure against shareholders who complain. “I asked Gareth Ackerman about the expenses and he said he’d forward it to the board. Then Raymond Ackerman stepped in and said no, we must leave the issue. And that was it. There was nothing further we could do.”
Botha says he can’t understand why the Ackermans want so much control. “Shareholders will continue to complain. The Ackermans must accept responsibility and then start doing things differently. But I don’t think they can.”
McAlpine doesn’t believe the last great pyramid can last too much longer. “The Ackerman pyramid will go – it’s only a matter of time. Shareholder pressure will see an end to it.”
That seems to sum it up. We spoke to a few institutional shareholders in Pick n Pay, including some hedge funds that didn’t want to be named, and the feeling was that shareholder pressure was on the increase and would ultimately see the end of the Pick n Pay pyramid.
But it could be a long fight. All the pyramid examples we’ve looked at are controlled by families, apart from RMB Holdings, though the three founding directors are probably as close to a family as you can get. And it’s not hard to understand that families – some having spent lifetimes building up the family fortune – want to keep control through whatever mechanism possible. But pyramids might not be an option for too much longer, with Pick n Pay providing the grand finale.
Pick n pay
No premium in the pyramid
Last operational results were poor
CAN THE SHAREHOLDING structure of a company affect operational performance? That’s difficult to determine and in most cases it would probably not. But Pick n Pay’s artificial control through a pyramid structure is being called to account, with shareholders claiming it’s affecting operating performance. “Shareholders are concerned about Pick n Pay’s poor operational performance. They believe deconstructing the pyramid would make the group more competitive. There’s also a concern that if performance remains poor, Pick n Pay could be taken over,” says Chris Logan, a director at Opportune Investments.
Just as owner control through a pyramid can be used to ward off a hostile predator, the best protection is good operational performance. That should translate to an appreciating share price – the best protection of all.
Pick n Pay’s most recent financial results (for its first half to end-August 2010) weren’t very inspiring and are even worse when compared with competitors in the retail food industry. Turnover grew by a credible 6% to R25,3bn but profit margins came under pressure, resulting in headline earnings per share dropping by 12%. The group put the results down to the competitive environment and reluctance of over-indebted consumers to spend too much. Critics said Pick n Pay had spent too much developing and redesigning stores, an investment that’s yet to yield results.
It’s quite typical for the share price of holding companies to trade at a discount to operating companies. In the case of Pick n Pay Holdings, the discount to Pick n Pay Stores is roughly 7c/share or, at the market capitalisation level, around R2bn. However, that isn’t out of line with regular holding/operating company share prices, so doesn’t suggest the pyramid structure offers a greater discount.
Where the difference is perhaps more pronounced is when comparing share prices to net asset value. At 1993c/share at the close (17 January), Pick n Pay Holdings was at a discount to NAV of 2409c/share. On the other hand, Pick n Pay Stores closed at 4711c/share, a fair premium to NAV of 4476c/share.
That’s the discount hedge fund managers can exploit and why quite a few hedge funds invest in Pick n Pay, taking short and long positions on two listed companies in the same group. The discount gap is also exploited by traders who sense any possibility of that closing up, as it does occasionally.
Share price performance of the two listed Pick n Pay companies largely track each other. Pick n Pay Holdings has done marginally better, its price increasing by 6,1% over the past six months and 18,8% over the past year. Pick n Pay Stores was up 5,6% over six months and 17,5% for the year, which makes Pick n Pay Holdings the more attractively priced share, on an earnings multiple of 16,9 times and dividend yield of 4,2%. Pick n Pay Stores is on an earnings multiple of 21 times and dividend yield of 3,7%.
If you want to invest in Pick n Pay, it seems better to get into the top structure alongside the Ackermans. However, neither share can be considered cheap and some analysts’ forecasts have marked both as a sell.
Another contentious issue is Australian retailer, Franklins. Pick n Pay now wants to sell Franklins, for around US$183m, to Metcash Trading, an unlisted company and Australia’s third largest food retailer. But the deal is being delayed by the Australian Competition and Consumer Commission, which has started legal proceedings to try and block the proposed sale, saying it’s anti-competitive. The board of Pick n Pay is opposing that.
But some investors – particularly hedge funds – say they were warning Pick n Pay’s board a few years ago to sell Franklins. That fell on deaf ears, they claim. Had Pick n Pay listened, millions of rand could have been saved.
RESPONSE FROM PICK N PAY
Why a family-owned business needs pyramid control
PICK N PAY was founded in the belief that family control was the only way we could ensure the maintenance of the principles that have informed our commercial conduct since 1967. For four decades, family control has protected those values in a business environment where ethical behaviour hasn’t always been the dominant practice.
Throughout the world, family-owned businesses continue to play an important role in the development of economies. In the United States they form the backbone of the American economy. Some 35% of Fortune 500 companies are family-controlled, while family businesses account for 50% of the US’s gross domestic product. They generate 60% of the country’s employment and 78% of all new job creation.
Against that background it’s important to remember why Pick n Pay Holdings was created as a pyramid holding structure in the first place. In 1981, amid rumours that certain business interests were exploring a takeover of a majority of Pick n Pay shares, it was a necessary step in order to prevent a hostile takeover. Consistently high returns to shareholders since then have amply shown the wisdom of that strategy and decision.
Now – 22 years later – Pick n Pay control remains in the hands of the Ackerman family, despite the worldwide decline in large family businesses and despite the numerous disincentives that confront such enterprises. In SA, corporate governance requirements introduced over the past four years have unintentionally erected barriers to the formation and sustainability of big family-owned businesses such as Pick n Pay, with the result there’s a decreasing number of such enterprises listed on the JSE.
Above all, perhaps, family control has enabled us to take the long view when devising strategy, considering plans for expansion and assessing the risks of future investment. That we would have been unable to do had we been restrained by the demands of majority institutional investors or private equity shareholders for immediate returns and short-term benefit.
As far as our Australian operation is concerned, analysts welcomed our initial investment as a good rand hedge. With the exactness of hindsight we could have invested elsewhere. The decision to stay in Australia was taken by the board at the time, and I respect that decision. However, a strategic review undertaken during my first few months as chairman made it clear to the board that an exit strategy was the best option.
As a matter of record, I need to point out family entities have greater than 50% of Pick n Pay Holdings and the family is not dependent on the Pick n Pay Share Trust to vote in its favour on any issue requiring a simple majority.
GARETH ACKERMAN
Chairman of Pick n Pay Holdings
TRENCOR AND MOBILE
Families aren’t forced to be pyramids
TRENCOR AND MOBILE Industries were, until late last year, a classic pyramid structure. Top-listed holding company was Mobile, with a 46,25% shareholding in Trencor, which in turn holds 61,8% of New York Stock Exchange-listed Textainer.
At the very top was the Jowell family, holding 25,1% of Mobile. And not unlike Pick n Pay – where father Raymond Ackerman and son Gareth chair the respective listed holding companies (and swapped chairman positions last year) – Cecil Jowell is chairman of Mobile and Neil Jowell chairman of Trencor.
But following various board meetings – and no doubt much reflection – Trencor and Mobile decided to unbundle the entire 46,25% holding Mobile had in Trencor, wrapping up the pyramid structure. The deal involved a substantial share buyback by Trencor and negotiations with the JSE, which ruled that despite the unbundled stake Mobile was still an associate of the Neil and Cecil Jowell trusts. However, the issue was resolved with the JSE and early this year Mobile and Trencor told shareholders all conditions precedent had been met and the unbundling would be implemented – which is taking place about now and into the first week of February.
In terms of the unbundling, Mobile shareholders will receive 8,117 Trencor shares for every 100 Mobile shares held, based on a price a little higher than the current 3500c/share Trencor was trading at last week.
What the exercise demonstrates is that pyramid structures are unpopular, even with some of the companies using them. It also shows family control doesn’t have to be protected through artificial control. It may be a little daunting for a family to let go but, ultimately, control is protected by good operating and financial results.
The history of voluntary dismantling of pyramids also goes back a number of years, the earliest example we were told about being Brian Joffe and Bidvest. In its early days – it was a classic pyramid, with control retained through top-listed holding company Bidcorp. But Joffe decided to get rid of the structure, apparently because he felt it was the right thing to do.
