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SK means a slim time for Cedenco minorities

Friday 28th February 2003

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What's going on at tomato processor Cedenco?

California's SK Foods, the vehicle of food magnate Frederick Scott Salyer, recently filed without fanfare a substantial shareholder's notice showing it had lifted its stake from 54.8% to 57.7%.

SK bought a 48.5% stake in May 2001 from Brierley Investments at $1.52 a share and topped up to 54.8% by buying out Maori investor Mangatu.

Under the "creep" provisions of the Takeovers Code, as a majority shareholder SK can buy up to 5% of the shares a year without having to launch a code offer but it has only recently used the privilege. It bought 450,000 shares on-market between September 6 last year and February 11 at an average price of $1.75.

At the time it showed up, Mr Salyer said he was happy to have minority shareholders but insisted the company wouldn't need to raise capital.

Last February SK bought Australian group Cerebos' 50% share of a tomato processing joint venture with Cedenco. Cedenco said it would be too stretched to buy out Cerebos itself.

Last July the company parted company with its director and former long-time managing director Dean Witters, citing "the remaining board members' belief that the future image, direction and vision of the company was now different to that of Mr Witters."

The September full-year profit came in at a solid $4 million or 26c a share. The board announced in February it would not pay a dividend, probably for three years, "as it pursued growth opportunities."

Cynics might wonder why SK doesn't just get on with it and buy out the minorities ­ or hold a rights issue and raise some real money if the expansion opportunities are so great.

Or is dividend starvation a way to encourage shareholders to sell on market so SK can scoop the stock up?

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