Who will guard the guards?

Someone please take over the Takeover Regulations Panel.

The inevitable has happened. The Takeover Regulations Panel (TRP) has ruled against my complaint (see its ruling here, treating me as some type of litigant) in the matter of the Steinhoff-Brait-Pepkor deal, and allowed the waiver of the mandatory offer that would legally have been required of the concert parties who so willingly owned up the fact of their material voting power within the Voting Pool in the Steinhoff-Brait-Pepkor transaction.

It is interesting that the TRP doesn’t say in its ruling that (a) it has established that the Voting Pool does indeed own 35% or more of the voting power (a fundamental requirement of the application for the waiver) or (b) that it has now been furnished with the details of who are the parties to the voting pool.

No sirree!

Why do I call the ruling inevitable? Well, Messrs Jacobs and Yaniv Kleitman of Cliffe Dekker Hofmeyr spilled the beans in their response (which I do not believe was in any way accidental) to the TRP in answer to my complaint: “It should be noted… that the specific matter of disclosure of the Voting Pool Parties… (i.e. … not by name) was approved by the Panel prior to the issue of the Circular”. So there you have it, in the clearest type possible. The TRP had given an advance ruling (that would have remained secret forever, had the attorneys not spilled the beans) on the very aspect that concerns me most. [I wonder how much research the TRP did on the impact of the matter? Did it in fact consider that it might be sold a pup?] If anyone thought that the TRP was going to even consider going against its own advance ruling, they probably also believe in the Tooth Fairy. And of course the attorneys had the gall to state that because they had told us that the Voting Pool had 35% or more, that means that there is no question that it is in fact the case; they don’t have to prove it. Ho hum.

To this day we still don’t know who the concert parties are and what equity they hold, in full detail. Of course, the chairman of Steinhoff and its company secretary must know – they told us so at the AGM. But for the rest of the minority shareholders this is still a secret.

‘Oh, Mr Botha, don’t waste our time!’ must be what John Biccard of Investec Asset Management is thinking. His comments reported in Financial Mail include ‘I have no idea of the significance of what he is saying’ (accessible here). He is reportedly puzzled by what is referred to as my gripes. Now I am always happy to disagree on matters, but it seems a bit rough that even after some 23 500 pageviews of my last column on the matter by a variety of readers, an asset manager with a major stake in and a great deal of support for Steinhoff, is still left with no idea of the significance of my concerns.

In short Biccard, I would like shareholders to be sure that the request for a waiver was valid at the time, because contrary to what others have said, you can’t get past the 34% I calculated on the facts available; and I am of the view that we need to know which Steinhoff and Pepkor management and/or Steinhoff independent directors are part of the pool and thus affected by Wiese’s effective control of that pool in future. I would also like to know what happens to more waiver requests when the pool composition changes in future (how would the TRP know?).

And then it would be really useful to understand why Brait is locked up in a voting pool that seems to take away its voting rights and regulate its exit strategy (what was the Brait board thinking?)? And also to determine how on earth the existence of a voting pool could hold value for the Steinhoff company itself? But that is not the function of the TRP.

Why this fuss, you ask? Simply this: the fibre of corporate law is the assumption that the rules will be applied as written, that judgment will be applied fairly, that no prejudging will take place, and that objective analysis will inform the regulators. If not, gentle reader, we shall have chaos. Minority protection? Excuse my hollow laughter.

So why did the TRP even call on shareholders to make submissions? After it had prejudged the issue, what was the point? For goodness sake, Lucky Phakeng (Executive Director of the TRP): surely common sense should prevail – let’s just get full disclosure of the parties to whom you have now issued your certificate.

The TRP has now set a precedent that does not bode well for the future: I cry into my Rooibos.

(Theo Botha and Charl Kocks are partners at CorporateGovernance.Pro, part of the team that produces Proxy View, a service for individual shareholders of listed companies to help them decide how to vote. Follow Theo on Twitter: @tjbbotha)

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