Proposed buyout of Bell Equipment minority shareholders fails

JSE-listed heavy equipment manufacturer Bell Equipment confirmed on Tuesday that the proposed buyout of minority shareholders by the company’s founding family trust has failed.

The announcement has been hailed as a victory for minority shareholders and corporate governance.

Richard Bay-based Bell Equipment said the independent board appointed to consider the proposed transaction has decided it will not be recommending the scheme of arrangement and buyout offer from IA Bell, the Bell family holding company and largest shareholder in Bell Equipment, to eligible minority shareholders.

The company said the fair and reasonable opinion issued by the independent expert appointed by the independent board “did not confirm that the scheme consideration is fair and reasonable” as required by a condition of the scheme.

In terms of the scheme proposed by IA Bell, it planned to make a firm offer to acquire all the issued shares in Bell Equipment it did not already own for R10 a share and thereafter delist the company.

Bell Equipment had a net asset value per share of R37.79 at end-June 2021, its most recent financial results.

Shares in Bell Equipment on Tuesday dropped by 2.62% to R12.64 a share within about an hour of the release of the announcement, but closed marginally up for the day at R13 per share.

The company’s shares slumped by 13.23% to close at R12.92 on October 22, the day Bell Equipment announced IA Bell had given notice of its firm intention to make the offer via a scheme of arrangement but had stuck to its initial indicative offer price of R10 a share.

Read: Scheme to buy out Bell Equipment minorities at R10 a share an exercise in futility?

Despite the decline in the share price on October 22, the closing price on that day was still 29% higher than the proposed offer price.

The R10 per share offer price raised the ire of minority shareholders, who claimed it undervalued the company.

Carson Mitchell, the managing member of Shipyard Capital Management LLC, who previously indicated it controlled 1.2 million shares in Bell Equipment, said on Tuesday the decision is “a win for minority shareholders and a win for South African corporate governance”.

“The regulatory process worked like it’s supposed to work: the independent expert declared the offer unfair and unreasonable, as did Bell’s independent board.

“And all this despite the Bell family controlling the board and having selected the independent expert,” he said.

Mitchell said shareholders now have the opportunity to participate in the upside of their shares, with Bell Equipment chairman Gary Bell just a year ago noting that the share should be worth R36 per share or more.

“This has been a long fight and it’s gratifying to have it turn out happily for shareholders,” he added.

Scheme ‘has failed’

Bell Equipment said on Tuesday IA Bell had decided not to increase the scheme consideration and confirmed to the independent board it will not be submitting any increase in the scheme consideration by December 2, 2021, the last date for the fulfilment of this scheme condition.

It added that: “Given that the scheme consideration will not be increased, the fair and reasonable opinion will not be revised by the independent expert.”

The company said this scheme condition is not capable of being fulfilled and the scheme “has therefore failed”.

Bell Equipment said the independent board formed its own opinion on the scheme consideration after taking cognisance of the fair and reasonable opinion issued by the independent expert, as the independent board is required to do in terms of the Takeover Regulations, it said.

IA Bell owns 70.1% of the issued share capital of Bell Equipment.

This follows IA Bell’s acquisition of 30 million Bell Equipment shares for R10 per share from John Deere Construction & Forestry Company effective from September 28, 2021.

IA Bell failed to obtain irrevocable undertakings from any of the significant minority shareholders in Bell Equipment to support the proposed transaction.

Sanlam Investments and Allan Gray, two institutional investors which own and/or control about 8.6% of the issued share capital of Bell Equipment, previously confirmed to Moneyweb that they would vote against the proposed offer while Ninety One declined to disclose how it would vote.

In terms of the proposed scheme of arrangement, only the owners of the 29.45% of the shares not already owned by IA Bell or certain shareholders who were related to or acquaintances of the founders of Bell Equipment would have been able to vote on the proposed scheme.