Undisclosed financial institutions, working through a trade finance house in Stellenbosch, have made an offer to acquire an 11% slice of KWV Limited's shares. But the company's board is fighting back, saying the tactics indicate hostile intent. Arnold Kirkby reports.

This is the second round in the battle for control of the boardroom on Main Street, Paarl and, if the first was anything to go by, we are in for another interesting few months.

KWV Limited is a non-listed public company. Its share price for the past three months averaged 136c (SA), but, since an announcement on Friday by Anglo African Trading (AAT) that it wished to acquire 50m shares at 160c, the share price has moved up to 156c.

The board has weighted KWV's shares at 253c, based on its net asset value (NAV), but analysts say this figure is representative of its historical value and that its potential, if unlocked, was worth a great deal more. One of these assets is its vast stock of brandy - KWV is the biggest producer of brandy in the country.

Coupled to any deal which the board considers to be hostile is a "poison pill" clause in the company's constitution, which allows for the sale at book value of the strategically important brandy stocks to the wine farmers co-operative VinPro. Nobody is saying at this stage what the value of the brandy is.

About three years ago a loose alliance of wine farmer-businessmen, popularly known as "the group of five", started acquiring shares with the aid of AAT - amassing almost 14% of the company's shares.

It is also understood that the original "group of five", were no longer part of this new AAT share-buying initiative and that they had gone their different ways earlier in the year. Sources said some had sold all or  part of their shares over the past three months, though the KWV company share register does not yet reflect this.

AAT has stated that it has accumulated more than 6m shares since the bid went live on Monday.

Complicating matters in this bun-fight is a South African government directive, that all levels of industry throughout the country must have a Black Economic Empowerment (BEE) component.

KWV announced in October last year that it intended fulfilling this mandate and started negotiations with a black business consortium, offering them a 25.1% share. KWV chairman, Danie de Wet said he hoped to tie up the BEE deal in 90 days. If this was done it could create an interesting scenario with two new major power groupings competing within the boardroom.

One of the greatest fears De Wet has of any possible takeover bid is the threat of asset strippers, who would sneak in and systematically slice the company up.

During a meeting with representatives of AAT earlier this week, De Wet said he had asked them who was behind the latest share drive.

"They refused to tell me who the potential purchasers were and this makes me extremely nervous because I need to know who we are dealing with. The manner in which they have gone about trying to acquire the shares, without the courtesy of informing the board that they were going to make the offer, shows hostile intent.

"AAT acquired shares for the original so called 'Group of Five' and they accumulated almost 14% of the shares. Suddenly they want to acquire another 11% of the shares - something does not tally - and as chairman responsible to many other investors it makes me extremely nervous.

"They also originally represented the 'group of five' in the initial rounds of discussions with the BEE consortium, so they obviously have a hidden agenda and we are not going to play their game," said De Wet.

An analyst said AAT acquiring an 11% share of the company was worthless. It was only when a 25%-plus share was attained that it became strategically important, because then veto powers came into play as well as the nomination of directors.

AAT spokesman, Niel du Bois, said the interested financial institutions mentioned in their bid offer declined to be named at this stage. "If they are successful and get their 50m shares, they will decide when and where to make themselves known," said Du Bois.

A source close to the "group of five" refuted De Wet's claims that they were trying to "get in through the back door" and that they had approached the KWV board when they first intended acquiring shares three years ago, but were shunned. This led to them working through AAT.

It was claimed that all possible means were tried to prevent the "group" from getting a seat on the present board on Main Street at the end of last year. It was also the reason for AAT making its present bid in the way it did.

Thus two determined groups again appear to be squaring up to each other in the heart of the Cape winelands for what many consider to be one of the most valuable assets in the industry.