Dawnlaan Beleggings (Edms) Bpk v Johannesburg Stock Exchange and Others

• Jurisdiction: South Africa
• Judge: Goldstone J
• Judgment Date: 30 April 1982
• Citation: 1983 (3) SA 344 (W)
• Court: Witwatersrand Local Division

Goldstone J:

The applicant is the holder of 55 900 "A" ordinary shares in the capital of the third respondent, Greatermans Stores (Pty) Ltd (to which I shall refer as "Greatermans").

There are 3 052 296 ordinary and 2 630 550 "A" ordinary shares in the capital of Greatermans, all of which shares are listed on the Johannesburg Stock Exchange (which is the first C respondent and to which I shall refer as "the JSE"). For practical purposes, certainly so far as this matter is concerned, the only material difference in the rights of the ordinary and "A" ordinary shares of Greatermans is that the latter are non-voting shares.

On 5 March 1982 a public announcement was made to the effect D that Kirsh Industries Ltd, the fourth respondent (to which I shall refer as "KI"), Kimet Ltd, the fifth respondent (to which I shall refer as "Kimet"), Metro Corporation Ltd (to which I shall refer as "Metro") and Coki Corporation Ltd (to which I shall refer as "Coki") had made arrangements with Grifhold Beleggings (Edms) Bpk (to which I shall refer as "Grifhold") in E terms of which the former were to acquire 50 per cent of Grifhold's "effective holding" of ordinary shares in Greatermans at a price of R15 per share.

It was announced further, inter alia, that:

(a)

KI would offer to acquire 50 per cent of the other ordinary shares in Greatermans at R15 per share.

(b)

F No offer would be made for the "A" ordinary shares in Greatermans.

(c)

To the extent that KI did not acquire 50 per cent of the total issued ordinary capital of Greatermans, Grifhold would dispose of that portion of its remaining holding to G KI, so that KI would, on completion of the transaction, hold 50 per cent of the issued ordinary shares of Greatermans.

(d)

KI would dispose of the shares so acquired to Metro for the issue of 536 000 Metro shares at R32,50 per share and the balance in cash. One half of the Metro shares so issued would be exchanged for 2 412 000 Kimet shares at R3,48 per H share. Arrangements had been made to place both Kimet's and Metro's shares for cash.

(e)

Metro would then dispose of its holding of Greatermans ordinary shares to Coki in exchange for 8 771 159 Coki shares at R1,94 per share and the balance in cash.

The terms of the aforegoing arrangements appear from a written agreement between Mr Isaac Kaye (to whom I shall refer as "Kaye") representing Grifhold, Griffon Holdings (Pty) Ltd, the second respondent (to which I shall refer as "Griffon"), one Miller and persons

Goldstone J

holding ordinary shares in Grifhold, other than Federale Chemiese Beleggings (Edms) Bpk on the one hand, and KI on the other hand. This agreement makes it clear that in fact it was Griffon and not Grifhold which sold the shares in Greatermans.

The ordinary shares of Kimet, Metro and Coki are also listed on A the JSE.

On 24 February 1982, the president of the JSE, Mr Richard Lurie (to whom I shall refer as "Lurie") in consultation with the vice-president of the JSE, Mr P Ferguson (to whom I shall refer as "Ferguson") and the manager (listings) Mr D T Gair (to whom I shall refer as "Gair") approved the principle of the B abovementioned offer to the shareholders of Greatermans. The authority of Lurie to have so acted, was confirmed by the committee of the JSE at a meeting held on 9 March 1982. At that meeting the committee itself also purported to approve the offer.

The Relief Sought:

In this application, which was moved as one of urgency, the applicant seeks, principally, an order pursuant to Rule 53 of the Uniform Rules of Court, on review:

"(1)

Setting aside the decision of the first respondent (JSE) that the fourth respondent (Kirsh) in seeking to D acquire control of the third respondent (Greatermans) is not obliged to extend to the holders of the 'A' ordinary (non-voting) shares of the third respondent (Greatermans), the proposed offer to the holders of the ordinary shares in the third respondent (Greatermans).

(2)

Directing that the first respondent (JSE) may not approve or permit the implementation of the proposed E take-over scheme (as reflected in annexure "D"), unless an offer comparable to that to be made to the ordinary shareholders in the third respondent (Greatermans) is made to the 'A' ordinary (non-voting) shareholders.

Alternatively to (2):

(3)

Remitting the matter to the first respondent (JSE) and directing the JSE to reconsider its decision in proper accordance with its prior public ruling that, save in completely exceptional circumstances justifying a departure from the principle of equal opportunity to all equity shareholders, the transfer of control of a G listed company will not be approved, more particularly that a proposed transfer of control of a listed company will not be approved unless the buyer undertakes to extend within a reasonable period of time a comparable offer to the holders of the remaining equity share capital whether or not such H share capital carries voting rights."

In the notice of motion there is also a prayer for interim relief pending the final determination of the review proceedings.

During the argument the minutes of the meeting of the committee of the JSE were handed in by consent. In consequence thereof all the parties were agreed that the question of interim relief fell away and that the Court was concerned only with the final relief to which I have just referred.

Goldstone J

The affidavits filed of record have been served upon the Registrar of Financial Institutions (to whom I shall refer as "the Registrar"). An official of the Department of Financial Institutions informed the Registrar of this Court that the A Department does not wish to become involved in this matter and that it abides the decision of the Court. Griffon has adopted a similar attitude as appears from a letter dated 20 April 1982, addressed by its attorneys to the applicant's attorneys.

The relief sought by the applicant is opposed by the JSE, which was represented by Mr Schutz, and by Greatermans, KI, Kimet, Metro and Coki, who were all represented by Mr Welsh.

The Facts:

Before considering the grounds upon which the applicant relies for the relief it seeks and the bases of opposition thereto, I propose to set out the relevant history of the matter as it emerges from the affidavits and the other documents filed of record.

C Mr Nathan Kirsh (to whom I shall refer as "Kirsh") is a director of Greatermans, KI, Kimet, Metro and Coki. In his affidavit on behalf of those respondents, Kirsh states the following:

"3.1

On 25 January, the third respondent ("Greatermans") published its interim report which was an unaudited statement of the consolidated results of Greatermans D for the 26 weeks ended 28 December 1981. A copy of such interim report is annexed hereto marked 'NK6'.

3.2

After publication of that report, it became apparent to the executive directors of the fourth respondent ("KI") that Greatermans was having substantial management difficulties. I say this because, in a period where companies carrying on business of a similar nature had increased their profitability, the profitability of Greatermans had in fact E reduced despite an increased turnover during that period. The period in question, that is the 26 weeks to 28 December 1981, was a period of buoyant economy where the profitability of a company such as Greatermans should have improved.

4.

The control of Greatermans at that time was held directly by Griffon Holdings (Pty) Ltd ("Griffon"), which company held approximately 44,3 per cent of the issued ordinary share capital of Greatermans, that is to say the voting F shares of Greatermans. All the issued shares of Griffon were in turn held by Grifhold Beleggings (Edms) Bpk ("Grifhold"). The shares of Grifhold were held as to 70 per cent by Messrs Isaac Kaye ("Kaye") and D B Miller ("Miller") and their associates and 30 per cent by Federale Chemiese Beleggings Bpk ("Fedchem"). The holding in Grifhold by Kaye, Miller and their associates was controlled by Kaye and Miller. Kaye was the executive chairman of Greatermans.

5.1

Mr David Kuper, who was a member of the consortium of G associates which held control of Grifhold together with Kaye and Miller, and who was a personal friend and business associate of both Kaye and myself, arranged a meeting between Kaye and members of the KI group.

5.2

The purpose of the meeting was to ascertain whether KI could assist in the management of Greatermans and at the same time obtain a substantial direct or indirect holding H in Greatermans. The KI group has substantial experience and expertise in the management of retail companies. It is the controlling company of the seventh respondent ("Coki"), Coki controls 54 per cent of Russell Holdings Ltd, a well known furniture chain having 361 stores throughout South Africa, a 30 per cent interest in Dion's Discount Stores and an approximate 37 per cent interest in Union Wine Ltd. The annual consolidated turnover of Coki, at that point in time, was approximately R500 000 000. KI is, in addition, the controlling company of Metcash Ltd ("Metcash") a chain of wholesale food stores, dealing also in domestic hardware and other accessories. Metcash has an annual turnover of approximately R750 000 000.

Goldstone J

5.3

Following upon the meeting arranged by Mr David Kuper, various other meetings were held and from the discussions at those meetings it appeared, inter alia, that Greatermans was in need of management assistance and that Fedchem was desirous of disposing of its indirect interest in Greatermans.

5.4

The meetings referred to above were held over the period A Friday 29 January through to Sunday 31 January 1982 and I was present and took an active role in all such meetings.

6.1

Following upon and as a result of those meetings, an agreement was arrived at between Kaye and/or...