A high-stakes court case has been brought against the Takeover Regulation Panel by activist shareholder Craig Butters, who claims the panel failed to properly investigate alleged takeover irregularities involving Peresec and its boss Warren Chapman. The case, set to proceed in the Western Cape Division of the High Court, centers on whether the panel is legally empowered to cut a deal with parties it assesses have broken the rules. Butters, a well-known figure in investment circles, has staked his reputation on the case.
The Takeover Regulation Panel is responsible for protecting minority shareholders, but Butters alleges that it folded under pressure when confronting Peresec and Chapman. The investigation was launched in August 2022, following complaints from jilted minority shareholders. The panel's report, dated May 2023, revealed that the actual agreement was concluded on a confidential basis, with detailed terms not disclosed. Butters has been fighting to obtain the full record of the panel's process, citing concerns over the leniency of the settlement.
The case revolves around the concept of "concert parties," where a group of cooperating investors buy a collective 35% or more of a company. The allegation is that the group around Peresec avoided making offers to minority shareholders by coordinating secretly. Chapman denies the allegations, maintaining that he and his associates were not acting in concert. The Takeover Regulation Panel's settlement with the parties was announced in April 2023, but Butters argues that it was not struck in a manner legally mandated by a lawful regulatory process.
Butters has faced significant barriers in his efforts to obtain information, including a Kafkaesque hall-of-mirrors experience when trying to access the full record of the panel's process. The Takeover Special Committee ordered the disclosure of the full record to Butters, but the affected companies, represented by Chapman, objected. Butters has funded the drawn-out legal battle out of his own pocket, having been an investor in two of the companies subject to takeovers by Chapman's group.
The stakes are high for both Butters and Peresec, with the potential implications of the evidence and the case for the regulator, Peresec, and the JSE. If Butters succeeds in enforcing his demand for a more robust investigation and sanctions, it could have significant consequences for Peresec. The case has already led to arduous legal skirmishes, including a recent court ruling that forced Butters to restart the main application.
The Takeover Regulation Panel's handling of the investigation has raised questions about its ability to effectively regulate takeovers. The panel's decision to settle with the parties without admission of any wrongdoing has been criticized by Butters, who argues that it was too lenient. The case is expected to have far-reaching implications for the regulation of takeovers in South Africa.
The outcome of the case will be closely watched by investors and regulators alike, with significant implications for the protection of minority shareholders. The court's decision will determine whether the Takeover Regulation Panel has the power to cut deals with parties that have broken the rules, and whether it has fulfilled its mandate to protect minority shareholders.
Key points
- The Takeover Regulation Panel's handling of the Peresec investigation has been challenged by activist shareholder Craig Butters.
- The case centers on whether the panel is legally empowered to cut a deal with parties it assesses have broken the rules.
- The outcome of the case will have significant implications for the regulation of takeovers in South Africa and the protection of minority shareholders.
