David faces Goliath in property buyout case 
Rob Rose

Chief Reporter

IN A David and Goliath case of shareholder activism, investor Arie Zevenbergen will clash with R2bn property company Vukile in the Johannesburg High Court tomorrow over the fairness of a buyout offer.

With few shareholders willing to fight companies, Zevenbergen’s defiance over his R1m investment in the MICC Property Income Fund may yet fire other wronged shareholders into taking action.

The dispute centres on an offer made by the Sanlam-controlled Vukile to take over MICC in February. Vukile already held 73% of MICC, and was able to get its hands on another 25% by offering to buy out minorities for R8,84 a share.

But Vukile was so successful only because it got the support of rival property company ApexHi, which owned 23% of MICC’s stock.

In 2004 ApexHi had thwarted Vukile’s earlier attempt to buy out MICC minorities. However, ApexHi now decided to accept Vukile’s offer in exchange for certain of MICC’s properties, even though it still did not want to take the cash offer.

The other minorities were not offered the option of properties, only cash. Zevenbergen owns less than 1% of MICC. But he is going to court because he said the offer was blatantly unfair as this deal allowed Vukile to get the largest minority on its side, before bullying the deal past the others on different terms.

“This offer wasn’t the same for all minorities, because ApexHi got the advantaged position of being offered properties, while the other minorities had to settle for cash,” he said. Eighty nine percent of the minorities offered the “cash only” option rejected it, he said.

Zevenbergen wants the court to order an extensive valuation of MICC, and for Vukile to raise its offer. Although the first court date is tomorrow, the matter may be postponed to later next month.

Zevenbergen also takes issue with the offer price of R8,84 a unit, saying a more accurate value would be R12 a share. He cites the fact that property companies typically trade at a sharp premium to their net asset value on the JSE, and MICC’s net asset value by March was R8,15.

Zevenbergen says he also has support from 25% of the minority shareholders (excluding ApexHi).

Another opponent is Ian Nairn, a director of two companies with MICC units, who wrote to various parties including Sanlam protesting the poor governance and “gross injustice done to minorities”.

In one letter, Nairn said: “It now seems that this David versus Goliath battle will have to be settled in the high court, which is totally unnecessary. The (perpetrators) of the injustice have no conscience.”

In affidavits, Vukile CEO Gerhard van Zyl said the opposition had “no foundation” as the offer was “fair, equitable and transparent”.

The court challenge has prevented the completion of the merger between MICC and Vukile.

Van Zyl said Zevenbergen’s court action was “clearly designed to delay and frustrate” the deal. He said it could also negatively affect Vukile’s share price on the JSE .

“If Vukile is unable to acquire the outstanding MICC units within the foreseeable future, Vukile is unable to proceed with its plans to delist MICC from the JSE.” The listing could cost R500000 over the next six months.

Zevenbergen acknowledged that if he lost, the cost of the court casewould far exceed the estimated R300000 benefit he could get by forcing Vukile to raise the price.

“It is the principle involved. They tried to bully all the minorities out of the company by doing a side-deal with certain shareholders. We cannot accept that,” he said.