Investment manager

Takeover of Distell: the court rejects the request of the investment manager

Heineken is about to acquire Distell for 38.5 billion rand.

  • In February, Distell held an extraordinary general meeting during which the shareholders voted on the resolutions related to the operation.
  • Sand Grove Capital Management, told the Western Cape High Court that the meeting where shareholders voted was not properly constituted.
  • But the court opposed it, with costs.

The Western Cape High Court has rejected an application by Cayman Islands-registered Sand Grove Capital Management to review the shareholders’ meeting that approved Heinken’s acquisition of Distell.

In February, Distell held an extraordinary general meeting where shareholders voted on resolutions related to the deal, such as the plan of arrangement that would see Heineken acquire the local company for R38.5 billion. .

Sand Grove argued that the meeting was improperly constituted.

Distell has two types of shares: common shares which are traded on the JSE and class B shares. Class B shares are not listed, but carry voting rights.

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Remgro, which holds 31% of the capital of Distell, is the only class B shareholder.

Sand Grove argued that the plan is invalid because Distell failed to hold two separate meetings for the different classes. He also argued that the vote was marred by a conflict of interest as “Remgro was able to exert significant influence over the negotiations with Heineken leading up to the project and to agree on the direction of the post-project companies”.

The investment manager added that Remgro should have been excluded from the voting process.

But in his reasons for denying the request, Judge AG Binns-Ward said that excluding Remgro from voting rights for its Class B shares with its ordinary shares would deprive it of its right that comes with its shares and would not be compatible with the Distell memorandum. incorporation.

“I am not satisfied [with] the facts alleged by the petitioners that there is a sufficient dissimilarity between the rights of the holders of the two classes of securities of the company and the effect of the scheme on these rights to justify or require that the vote on the resolution should have been taken separately meetings,” Binns-Ward said.

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Sand Grove also initially claimed it held a 3.72% stake in Distell, which it later withdrew after determining the shares were registered under Standard Bank Nominees and First National Nominees as local custodians.

Distell and Heineken countered by saying that the Companies Act only allowed registered shareholders to vote and as such Sand Grove had no right to sue.

Thus, Sand Grove requested authorization for the First National Nominees and the Standard Bank Nominees to intervene as co-plaintiffs in the proceedings.

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But the court also denied that request, saying it would not help the investment management firm in its claim.

“Such a request cannot be saved by the intervention of a person who had the right to exercise a vote on the resolution and who voted against but did not take the resolution under review before his right to do so has expired,” Binns-Ward said. .

The opportunity for nominee companies to challenge the resolution expired 10 business days after the vote.

The court also ordered Sand Grove to pay Distell and Heineken’s legal costs of R300,000 each.