Senwesbel and Senwes stand to lose more than R100-million in damages and lost dividends should they lose a case brought against them by Treacle, a black-owned private equity firm based in Johannesburg.
Treacle has alleged in court papers that the directors of Senwes contravened sections of the Companies Act by acquiring the firm’s shares on its behalf and instead of cancelling them, selling the shares to Senwes’s holding company, Senwesbel.
Senwesbel is an investment company that holds a 41 percent stake in Senwes, an agricultural business focusing on the development of access to markets for agricultural produce.
In the 2010 financial year, Senwes recorded a R9 billion turnover with average assets of R2.65bn. It posted its second-highest profit, at R209 million, after recording its highest profit of R368m in 2009.
Treacle alleged in court papers that Senwesbel directors serving on the Senwes board practised “serious breaches of corporate governance and conflict of interests”.
Treacle further suggested that the dispute between the companies transpired after the misdirection of financial assistance provided by Senwes to Senwesbel, which enabled Senwesbel to acquire Senwes shares between 2004 and 2005.
Treacle claims that this financial assistance saw Senwesbel increase its shareholding in Senwes by 8.3 million shares, representing 4.7 percent of the issued shares in Senwes.
Treacle and Royal Bafokeng Holdings acquired 27.1 percent of Senwes in a ground-breaking black economic empowerment (BEE) deal in January 2006. This resulted in the companies owning 34.7 percent of the issued shares in Senwes.
Treacle also alleged that in December 2003, Senwes provided financial assistance to Senwesbel to buy Senwes shares at 80c a share, which was below the trading price of 84.5c. This was after Senwes received a special shareholders’ resolution to buy its own shares.
The offer by Senwesbel was made in terms of the resolution passed by Senwes shareholders. In addition, it was extended to June 20, 2004, six days prior to the publication of the Senwes 2004 financial statements, which specified that the offer price of 80c a share was below the earnings a share of 83c.
Treacle has further alleged that the directors of Senwesbel acquired Senwes shares after gaining inside information.
Senwes and Senwesbel chairman at the time, Japie Grobler, is alleged to have lied to shareholders in the 2004 Chairman’s Report when he said that the purchase offer was made by Senwes “knowing fully well that the offer was made by Senwesbel”, Treacle alleged.
Senwes and Senwesbel denied the allegation, stating that the objective of the Senwesbel purchase was to enable Senwes to do a BEE deal. Furthermore, they alleged that Treacle condoned the contravention when it acquired shares in Senwes. - Business Report