The Financial Sector Conduct Authority (FSCA) has registered two investigations against JSE-listed Bell Equipment – one related to alleged insider trading and the other to whether the company published any false, misleading or deceptive statements about the company or its securities during July 2020.
The FSCA confirmed to Moneyweb on Wednesday that it had registered the investigations after receiving “more than one complaint”.
It said the insider trading investigation relates to transactions in the securities of Bell Equipment Limited executed during the period June 1 to September 30, 2020.
“Both investigations are ongoing, and we are not in a position to provide any further comment thereon at this point in time,” the FSCA said.
The FSCA’s comments coincided with Bell Equipment reporting on Wednesday that it has been notified that all the conditions precedent of the share purchase agreement between IA Bell and John Deere Construction and Forestry Company have been fulfilled.
IA Bell, the Bell family holding company, is already the largest shareholder in the JSE-listed manufacturer of heavy equipment for construction, mining and agriculture, with a 38.7% shareholding in the company.
In terms of this transaction, IA Bell proposes to acquire 30 million Bell Equipment shares from John Deere, which will mean IA Bell will hold about 70.1% of the issued ordinary share capital of Bell Equipment once this transaction becomes unconditional and is implemented.
This appears likely to trigger a mandatory offer by IA Bell to minority shareholders in Bell Equipment to acquire all the shares in the company it does not already own.
Bell Equipment had already advised its shareholders in March 2021 that it had received a non-binding expression of interest from IA Bell about a possible transaction to acquire – by way of a scheme of arrangement – the entire issued ordinary share capital of Bell Equipment not already held by it.
IA Bell’s indicative offer price was R10 per share, which it said in March 2021 is the same purchase price at which it “may acquire 30 million Bell Equipment shares from John Deere”.
Bell Equipment did not provide any update on the proposed offer to minority shareholders on Wednesday, merely stating that: “The Company will comply with the JSE Listings Requirements and the Takeover Regulations Panel requirements on receipt of the notification by IA Bell of the increase in its shareholding once the closing of the John Deere transaction has taken place.”
The proposed buyout of Bell Equipment minorities by IA Bell has been mired in controversy.
Issues of concern include:
- The indicative offer price of R10 per share;
- The alleged trading in Bell Equipment shares by IA Bell in 2020;
- The fact that Gary Bell is chair and sits on the board of Bell Equipment and is also a director of IA Bell; and
- The company’s alleged refusal to issue AGM minutes that accurately reflect Gary Bell’s view on the fair value of Bell Equipment.
Bell Equipment’s net asset value per share increased to R37.79 at end-June 2021 from R36.64 in the prior year.
Some minority shareholders also reportedly lodged complaints with the JSE and Takeover Regulation Panel (TRP).
The JSE and TRP had by late on Thursday not yet responded to questions emailed to them by Moneyweb.
Attempts to obtain comment from Gary Bell were unsuccessful.
Bell Equipment CEO Leon Goosen said last week the company obviously engages with the regulatory bodies on a regular basis and has an independent board that obtains sufficient expert legal advice to make sure it complies with the requirements of the law.
“There are a lot of things in the press. It’s not always the easiest to deal with these things. People have different views and motives.
“All I can do is confirm that we acted within the regulations and the laws and we take this quite seriously,” said Goosen.
“I’m quite comfortable that most of these are pure accusations but let’s see what happens when the real offers start to come and how they react.”
Goosen said he did not have any idea when IA Bell will make a firm offer to buy out minority shareholders.
Commenting on the criticism of the variance between the R10 per share indicative offer price from IA Bell and Bell Equipment’s net asset value per share of R37.79 at end-June 2021, Goosen stressed that when the process starts, an independent expert who will be required to express an opinion on whether or not the offer price is fair and reasonable will be appointed.
Shareholder with questions and criticisms
Carson Mitchell, the managing member of Shipyard Capital Management LLC, said in an open letter published in April 2021 that Shipyard controlled 1.2 million shares in Bell Equipment and R10 per share does not fairly value the business.
Mitchell said the fact that price-sensitive information is being deliberately withheld from shareholders “makes the hoped-for delisting look predatory rather than opportunistic”.
He said requests seeking more disclosure from Bell Equipment to better understand the scope for self-dealing between Bell Equipment and its chair’s holding company had either been rebuffed by Bell Equipment or had been answered with data that contradicted what was publicly disclosed at the Companies and Intellectual Property Commission (CIPC).
Mitchell said Bell Equipment claimed in a Sens announcement published in February 2021 that R10 was the full extent of the John Deere consideration paid by the holding company for a larger stake in Bell Equipment, but subsequently confirmed there is an additional contingent payment (agterskot).
He stressed that price matters because it will set a floor on a subsequent tender for minority shares, adding that the agterskot is triggered if the holding company sells Bell Equipment to a third party within two years for more than R10 a share.
Mitchell publicly called for the resignation of Bell Equipment directors John Barton, Gary Bell and Ashley Bell.
He said the conduct of these directors has not met the standards of candour and good faith imposed by the Companies Act.
Bell Equipment last week reported a turnaround to a profit after tax of R176 million in the six months to end-June from the R52 million after tax loss in the previous corresponding period.
Headline earnings per share amounted to 176 cents compared to the 31 cents headline loss per share for the first half of its 2020 financial year.
Revenue rose by 25% to R3.84 billion from R3.07 billion while operating profit improved significantly to R267.23 million from R773 000.
The group said it remains optimistic that the positive outlook for the northern hemisphere will continue through to 2022 and factory production will be maintained accordingly.
However, it said growth in South Africa is not anticipated and management is focused on the availability, reliability and cost of components and logistics that feed into production.
Shares in Bell Equipment on Thursday dropped by 2.03% to close at R12.05.