Freeworld Paints.
Board of directors of Freeworld Coatings accused of not acting in the interests of the company by attempting to delay an offer to purchase it.
| MARK ALLIX |
Published: 2011/04/01 06:37:34 AM |
THE board of directors of Freeworld Coatings was accused yesterday of not acting in the interests of the company by attempting to delay an offer to purchase it.
Anger exploded at the company’s annual general meeting (AGM) yesterday after its directors abruptly adjourned the gathering .
Japanese industrial and decorative coatings company Kansai Paint offered R12 a share for all of Freeworld’s shares last April. The bid has been accepted by more than 90% of Freeworld’s shareholders.
But its directors are ignoring the wishes of the shareholders, saying that while the price is "fair and reasonable", the offer breaches competition law, and that the timing of the bid prejudices shareholders.
Like US retailer Walmart, which is buying Massmart , Kansai is being blocked by the Department of Trade and Industry, which wants the deal halted and to be subject to conditions. Kansai and Freeworld filed separately with the Competition Commission in January, which is due to give its ruling on April 18.
At the meeting yesterday, Freeworld shareholders branded the directors "pathetic" and accused them of breaching corporate governance rules.
"I do not wish to restrict the rights of a substantial group of shareholders to participate fully and freely in the AGM, and in light of possible illegality, I am invoking my inherent right to adjourn today’s AGM to April 28 2011," Freeworld chairman Bobby Godsell said when he ended the meeting.
Mr Godsell said Freeworld’s legal advisers had warned that if the meeting went ahead, both Freeworld and Kansai could face substantial fines. He said the Competition Commission had recommended that it would be prudent to adjourn the meeting until it had made its ruling.
"I feel this course of action does minimum prejudice to our shareholders," Mr Godsell said after the meeting, and that if those who favoured the deal had been allowed to vote, he could have been sanctioning a criminal act. "But for our competition concerns, we would be recommending the offer," he said.
Listed in December 2007, Freeworld makes the iconic Plascon paints brand, and has branches across Southern Africa. It also operates in Australia and China.
Kansai Paint is one of the world’s top 10 producers of paints and coatings for the automotive, industrial, marine and decoration industries.
On Wednesday, the Department of Trade and Industry said it had made a submission to the Competition Commission that the takeover of Freeworld be prohibited, or approved subject to public interest and competition concerns.
Freeworld said it had no knowledge of the department’s position until Wednesday.
Kansai’s global head of strategy, Nauman Malik, said the company was "disappointed and surprised" at the adjournment of the AGM .
Some shareholders disagreed with the Freeworld directors and the department. "In effect, they took away our votes," individual shareholder Mike Michaels said after the meeting. "In terms of the available data ... at R12 a share it’s a good offer. The directors have ignored their responsibilities. If they had engaged (with) Kansai, they could have possibly moved to R14 a share."
David Couldridge, an investment analyst at Element Investment Managers, said: "This board is not acting in the interests of shareholders and the company."
The private asset management group owns 17,5% of Freeworld shares, and supports Kansai’s bid.
"It appears to us they are trying to delay the transaction in the hope that Kansai will withdraw," Mr Couldridge said. Element had no comment on the government’s stance on the matter. "What we want to comment on is the poor governance of this company," he said.
allixm@bdfm.co.za
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