Greenmail’ claims in Kagiso bid battle

Accusations are flying over the actions of a minority shareholder in the Perskor arbitration, writes Max Gebhardt

DEEP within the stack of legal documents presented to former judge Mervyn King, for arbitration in the multi-million rand acquisition of Kagiso Publishers by Perskor, are a number of affidavits outlining alleged attempts to “greenmail” Rand Merchant Bank (RMB).

The affidavits allege that Manfred Simchowitz, a South African businessman who now resides in the United States and owns a minority stake of 3% in Perskor, and stockbroking firm Frankel Pollak were behind the attempt to “greenmail” RMB.

“Greenmail” is an American term for attempting to extort a higher value for shares than those traded on the open market.

Simchowitz, it is alleged in the affidavits made available to the Mail & Guardian, had approached RMB in August, through Frankel Pollak, in an attempt to sell his holdings in Perskor. Apparently RMB was unable to find a buyer for Simchowitz’s shares, for which he wanted in the region of R225 each – significantly higher than the ruling price on the day of R170.

When RMB said it was unable to find a buyer at that price, Frankel Pollak said its client, Simchowitz, had serious “grievances” that needed to be addressed.

RMB apparently interpreted this to mean an attempt to blackmail the bank.

Not so, say members of the Simchowitz camp. They alleged, when approached by the M&G, that RMB had offered to buy Simchowitz’s shares, but had later backed out.

RMB said it had no comment on the whole incident. This begs the question whether Perskor could have removed, for a mere R13,75-million (the difference between the prevailing price and Simchowitz’s asking price) what has now turned out to be a serious thorn in its side. Simchowitz holds 250 000 shares in Perskor through his company Goudstad Nominees.

Insiders at RMB said, as far as they are aware, Simchowitz is the only minority shareholder objecting to the acquisition.

Simchowitz made an attempt a number of years ago to acquire a controlling stake in Perskor.

King had nothing to say on the series of affidavits concerning the alleged attempts at blackmail when he presented his rulings on the arbitration earlier this week.

King granted an interdict to minority shareholder company Goudstad Nominees, preventing the implementation of a deal which involved Perskor and Kagiso Trust Investment, Kagiso Publishing’s controlling shareholder, allowing Perskor to acquire the publishing group.

He ordered the respondents, which include Perskor, Persbel, the holding company of Perskor, Dagbreek Trust and the Rembrandt Group, to pay the costs of the action estimated at R300 000.

The former judge said Perskor had used inappropriate sections of the Companies Act to implement the transaction. He rejected the minorities’ second objection that the average reader would be unable to determine the necessary information from the circular to shareholders.

Nevertheless, the slanging match continued unabated this week, with the Simchowitz camp accusing Dagbreek Trust, which through a complicated share scheme has a controlling interest in Perskor, of old-fashioned greed by awarding itself R97-million for giving up its stake in Perskor. They also feel that Perskor is paying an over-inflated price for Kagiso.

Meanwhile the Perskor camp is saying that Simchowitz and his people cannot understand the acquisition deal; it had explained that the R97-million payment to Dagbreek was in return for giving up its controlling stake in Perskor. This was a pre-condition that had to be met, as Kagiso, being part of the acquisition deal, wanted to have joint control of Perskor.

The price tag for Kagiso was not at all inflated, said Perskor, as it had to pay fair market value for the titles within the Kagiso stable, over and above the net asset value of the company.

The acquisition deal has to effectively go back to the drawing board as a result of King’s findings, but both sides say they are expecting the new sets of proposals to be ready by the end of November.

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