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Sovereign: Let Off The Hook By Avian Flu
26 September 2017 | Jeremy Woods: Out of the Woods
 


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The last thing any South African farmer wants is a bout of avian flu - it kills thousands of chickens and leaves the industry in a cash-strapped tailspin.

While the avian flu epidemic has imploded many chicken producing companies, it has saved the life of chicken producer Sovereign, which has been ducking the rapid fire of a takeover bid from Country Bird Holdings (CBH).

Country Bird had put in a bid to acquire more than 50% of Sovereign’s shares at R9 each. This was then trumped by another bidder, Capital Works, which offered a hefty 33% premium on the R9 offer made by Country Bird Holdings.

But the avian flu has become a great settler and forced Country Bird Holdings to kick its final R12-a-share bid into touch.

Where does all this leave Sovereign?

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Probably fighting for its corporate life, like many of the other chicken producers who are all desperately trying to save their chickens from the highly contagious virus.

"We see the avian flu situation as a game changer and we have decided to take the R12 bid and walk away," says the CBH CEO, Marthinus Stander.

Also affected by this chronic bird flu is Astral Foods, another leading Southern African poultry producer.

"To date the cost of the most recent outbreak, together with the cost of the first outbreak at Villiers that occurred in June 2017, amounts to R50 million," says an Astral spokesman.

Chris Schutte, Astral’s CEO, concludes: "We trust that Government and the relevant authorities will act swiftly and diligently with their approval to use vaccinations against HPAI (avian flu) in poultry breeding stock. When the country was faced with the invasive Fall Army Worm threat in the maize industry, the matter was dealt with urgently by Government and received personal attention from the Minister of Agriculture. The HPAI outbreak in South Africa is no longer just a concern for individual poultry farmers, but is of national interest to all poultry dependant industries and job creators."

Shareholders in chicken stocks also have a problem. The choice seems to be sit it out - or sell. 

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Jeremy Woods

Jeremy Woods trained for three years as a journalist on the Herts Advertiser, St Albans, in the U.K. Once qualified, he left England to work as a crime reporter on the Vancouver Sun in Canada. After three years, he worked for the Los Angeles Times as a trainee financial journalist, spending most of his time reading company accounts and finding publishable stories in them. He moved to South Africa and for the last five years in journalism worked for the Sunday Times, Business Times, as Investment Editor. He has also published a financial thriller called "Special Payments", which was a best-seller on publication, and optioned three times for a film.


Disclaimer:
The information contained in this article is for informational purposes only and must not be regarded as a prospectus for any security, financial product or transaction. It is neither to be construed as financial advice nor to be regarded as a definitive analysis of any financial issue. Investors should consider this research/article as only a single factor in making their investment decision. We recommend you consult a financial planner/advisor to take into account your particular investment objectives, financial situation and individual needs.

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