Senior executives of Tiger Brands cashed in R44-million-worth of options early last year — just as the Competition Commission was beginning a price-fixing investigation that roasted the company.
The sell-off began on January 22 — the very day Premier Foods approached the Competition Commission for leniency in exchange for their cooperation with the collusion investigation.
By selling off at that moment the executives avoided sustaining significant losses as the inquiry pushed the share price down.
Before the probe became public knowledge the company’s share price was hovering around R175 but it has since dipped to a low of R130.
An investigation by the Mail & Guardian has shown that four executive directors and the company secretary sold R44-million-worth of Tiger shares in just over a month between January 22 and February 26 last year.
Tiger Brands was fined R98million by the Competition Tribunal in November for its role in bread collusion, but was soon back before the tribunal — this time for collusion in the pharmaceutical sector by its subsidiary Adcock Ingram Critical Care (AICC). That case led to a fine of R53,5-million.
The first sale of 78 300 share options at a profit of R13,5-million was made on January 22 by executive director Clive Vaux, who made another major sale the next day.
These were followed by a further four transactions in which executive directors Haydn Franklin and Mike Norris and company secretary Ian Isdale offloaded R10,2-million in share options between them.
Franklin was at the time the managing executive of Tiger’s grain business, where the bread collusion occurred. Norris was the former chief executive of Tiger subsidiary Adcock Ingram and had been seconded to Sea Harvest, another subsidiary. (For details of all transactions, see table, below.)
If the executives knew about the Competition Commission’s investigation before the sale of their share options, the transactions could amount to insider trading.
In response to questions from the M&G Tiger Brands said the first official communication it received from the commission about the bread matter was on the afternoon of February 14 last year.
Gerhard van Deventer, executive director of market abuse at the Financial Services Board (FSB), says the FSB is not investigating the sales of the shares.
Corporate governance expert and ex-FSB executive officer Richard Cottrell says that to ask whether the sales amount to insider trading is mere conjecture at the moment. However, he agreed to the suggestion that the number of directors who sold options and the significant amount of shares sold in such a short period make it look as if there may have been prior knowledge of the commission’s investigation.
Franklin and Norris had announced their plans to leave Tiger Brands in September 2006 and duly did so the following March. Isdale is still the company secretary.
However, the Competition Commission was told by a source that all three of the senior Tiger executives had known about the collusion at AICC since 2002 and had not acted on the information.
Tiger has often said that it is investigating these claims and that appropriate action will be taken when its investigation is concluded.
After these sales of share options, the commission referred the case against the bread manufacturer to the Competition Tribunal.
When the tribunal contacted Tiger about the matter on February 14 last year there was another flurry of selling. Both Norris and Vaux again offloaded share options and Tiger’s chief financial officer Noel Doyle and AICC managing director Jonathan Louw did the same.
In total another R17-million in share options were sold by these four senior executives in the 11 days from February 15 to 26.
Doyle, who left Tiger last month to head vehicle body repair group Bluespec, was alleged to have known about the bread collusion, as pointed out in an anonymous letter that was sent to Tiger chairperson Lex van Vught.
The same letter claimed that Tiger’s chief executive Nick Dennis and Franklin also knew about the bread collusion. Dennis left Tiger on early retirement after the case was concluded before the tribunal.
Following the release of a confidential report into the collusion case by law firm Edward Nathan Sonnenbergs, Tiger confirmed that Doyle was one of 26 staffers who were disciplined.
Doyle is said to have received a final written warning.
Shareholder activist Theo Botha said companies must be very careful to protect their reputation and have a responsibility to protect the interests of their minority shareholders.
Botha criticises the fact that Tiger told its shareholders about the investigation only on March 14 2007 – a whole month after the case had been referred to the tribunal. It made the announcement in an item carried by the stock exchange’s Sens information service.
Franklin refused to comment this week, referring the M&G to Tiger Brands. He added that Isdale had all the information about the share option sales.
Attempts to contact Doyle and Norris were unsuccessful. Tiger Brands refused to tell the M&G how to contact them, even though Norris is still a director of Sea Harvest, a subsidiary of Tiger Brands.
Dennis told the M&G that he would try to find Doyle and Norris so that they could get in touch with the newspaper. At the time of going to print they had not made contact.
Isdale, Louw and Vaux are still employed by the Tiger group.
“The first official communication Tiger Brands received from the Competition Commission regarding the bread matter was on the afternoon of February 14 2007,” says Tiger’s head of corporate affairs Jimmy Manyi. “The referral which was received on February 14 related only to the bread investigation in the Western Cape.
“In the worst-case scenario, given that the total turnover of our Western Cape operations at the time was about R190-million, the maximum potential fine would have been 10% of R190-million.
“Given that Tiger Brands had a market capitalisation of approximately R30-billion, it is unlikely that the matter, given the facts at our disposal at the time, would have been sufficiently material to affect the share price.
“With respect to the bread investigation in the Western Cape, a media statement was released by the company on February 14 2007, the day that the company first learned of the referral.
“The board was also advised on February 14 2007 immediately upon receipt of the bread referral.
“Sens [stock exchange information service] announcements were made about the bread and pharmaceutical collusion investigations on March 14 2007 and February 12 2008 respectively.
“As you are aware, [Haydn] Franklin, [Mike] Norris and [Noel] Doyle have since left the company, and you are therefore free to contact them directly. Tiger will not be responding on their behalf.
“Franklin and Norris advised the board [around the time of] September 2006, long before the Competition Commission referral was brought to the attention of the company, of their intention to take early retirement with effect from March 31 2007.
“Doyle did not leave until the bread and milling investigation had been concluded and he left of his own volition.
“Doyle and [Nick] Dennis are not the subject of any ongoing investigation.
“In the case of [Ian] Isdale, Franklin and Norris we are still awaiting the report from the investigation.
“Doyle and Franklin are not serving on any other board within the Tiger group of companies.
“Norris is still a director at Sea Harvest, a subsidiary of Tiger Brands, and this position will be reviewed upon receipt of the pending outcome of the investigation.”