Merchant West Investments fund manager Piet Viljoen says criticism about a conflict of interest related to Ascendis Health’s delisting is completely without merit.
In September 2023, JSE-listed Ascendis Health announced it was considering delisting from the bourse.
In a cautionary announcement, the company informed shareholders that it has “initiated a process to investigate and progress a potential delisting of Ascendis from the JSE”.
It described this move as the next step in its strategy to unlock value and return capital to Ascendis shareholders.
Ascendis entered into discussions with a consortium led by ACN Capital IHC (Pty) Limited, which is owned and controlled by the Ascendis Health CEO, Chris Neethling.
In November 2023, the consortium led by Neethling sent a letter to the Ascendis board confirming their intention to buy all the ordinary shares in the company.
The consortium consists of the following entities:
- ACN Capital, headed by Neethling
- Carl Andre Capital, of which Neethling is a director
- Dendrobium Capital, of which Neethling is a director
- Emfam Belleggins
- Kingston Kapitaal, of which Neethling is a director
- JVDM Trust
The exit offer was extended to all Ascendis shareholders looking to divest their interests as part of the delisting for 80 cents per share.
Viljoen became involved in this process through Calibre Capital, a company Viljoen co-founded, of which he is a minority shareholder and non-executive director.
Calibre is one of the largest shareholders in Ascendis, with a stake of around 14%.
Despite not being part of the offering consortium, a presentation circulated on social media stated that Calibre also wished to increase its stake in Ascendis by a further R50 million, or 10%.
It should be noted that Ascendis has denied that this presentation was an official company document. It said it was never presented to the Ascendis board, nor has the Ascendis board sanctioned it.
In December 2023, Ascendis listed the exit offeree shareholders that have provided irrevocable undertakings to vote in favour of the company’s delisting. It included Calibre.
It also stated that Calibre was among the exit offeree shareholders who provided irrevocable undertakings not to accept the exit offer.
Cilandia Capital activist investment manager Albie Cilliers accused Viljoen of having a conflict of interest because he is a minority shareholder, executive director, and portfolio manager of Merchant West Investments (MWI).
One of the funds managed by Merchant West – the MWI SCI Value fund – had a shareholding in Ascendis.
He was blamed for selling his Merchant West clients’ shares in Ascendis for less than what they were really worth and benefitting from buying them through his shareholding in Calibre.
Viljoen told Daily Investor that when the offer was made public, Merchant West sold these shares on the JSE at the offer price of 80 cents per share.
As one of Ascendis’ largest shareholders, Calibre – and, therefore, Viljoen – may directly benefit from this sale.
In correspondence with Daily Investor, Viljoen explained that the offer – if successful – would take a long time to be consummated.
Therefore, receiving the proceeds now is better for the unitholders of the value fund.
Another consideration was that a collective investment scheme such as the value fund cannot invest in unlisted assets.
“So, it does not have an option to not accept the offer and stay invested in Ascendis, as many other shareholders do,” Viljoen said.
As such, Viljoen said the criticism of a conflict of interest because of his shareholding in both Calibre and Merchant West is “completely without merit”.
“I am a minority shareholder in Calibre. I do not influence what it does or doesn’t do,” he said.
Viljoen said the financial service industry is rife with conflicts of interest, which is why he managed the process carefully.
“To avoid conflicts of interest is very difficult. The right thing to do is to manage any process in which there might be a conflict so that it does not affect one’s clients negatively,” he said.
He explained to avoid a conflict of interest, Merchant West took the steps below when selling its Ascendis shareholding.
- The order to sell was initiated by the fund’s lead portfolio manager, which is not Viljoen.
- The order was placed with a stockbroker by the Merchant West dealer. Viljoen did not direct the trade.
- The order was executed on the open market of the JSE.
Viljoen said the Merchant West clients were not prejudiced. “In fact, they benefitted from the time value of money by selling their shares – at the offer price – well before the offer was to be consummated”.
In addition, he said the clients avoided the risk of the offer being withdrawn, which would cause the share price to decline to its pre-offer level of around 60 cents per share.
“So, it is clear to me that the criticism is completely without merit,” he said.