Shareholders in move against Textainer execs

Frustrated Trencor minority shareholders — whose 48% stake in Textainer, once the world’s largest container lessor, has been a long-term underperformer — have resorted to an unused section of the Companies Act to remove mechanisms that protect the directors and management of Textainer.

The underperformance of Textainer, Trencor’s major asset, has caused the Trencor share price to slump from a high of R84 in mid-2014 to its close of R33.50 on Friday.

The Trencor shareholders want to remove Textainer bylaws that protect the directors and executives from legal action by shareholders and make it difficult for a third party to acquire control of the company without board consent.

They have used section 65 of the Companies Act to lodge resolutions for the coming Trencor annual general meeting. The section, which allows two shareholders to propose resolutions at a shareholders’ meeting, does not require a minimum shareholding. It has been described by corporate lawyer Carl Stein as a “powerful new right for minority shareholders”.

This is the first time it is being used by South African minority shareholders, who have, with a few notable exceptions, traditionally opted to avoid timeconsuming and costly action against an entrenched board.

Opportune Investments CE Chris Logan, who has owned a few hundred thousand Trencor shares for decades, is spearheading the assault on the bylaws, which he says shelters Textainer’s management and the board from the consequences of long-term poor performance.

The share price of Textainer, which was listed on the New York Stock Exchange in 2007, has been on a downward trajectory since it peaked at $42 in February 2013. It is trading at about $15, close to the level at which it was listed. No dividend has been paid since 2016.

It is trading well below its net asset value of $20, whereas industry leader Triton is trading at a premium based on strong profit growth.

In a letter addressed to the Trencor board, Logan said it was clear the “extraordinary” provisions “are a pivotal cause of the deeply entrenched complacency and structural underperformance” of Textainer over the past five years. A second minority shareholder, Elizabeth Corbett, is backing Logan’s move.

The shareholders have lodged two resolutions with Trencor for consideration by shareholders at the upcoming annual general meeting.

The resolutions call on Trencor to use its “substantial influence” to remove the “antitakeover” bylaws. They also call for the two Trencor directors on the Textainer board, Hennie van der Merwe and David Nurek, to support this move. If the resolutions succeed and the bylaws are removed, the board might not only face legal action for Textainer’s poor performance but the company would be more vulnerable to a takeover.

Even if the resolutions are not passed by the required 50% of shareholders, the unprecedented action would have drawn attention to an embarrassing board issue.

Van der Merwe acknowledged the resolutions had been received. “The board will respond in an appropriate manner and expeditiously,” Van der Merwe told Business Day.

Coronation Fund Managers, which holds 12% of Trencor, said it did not have a comment on the shareholder action or the longterm underperformance of the company. Investec Asset Management, which also holds Trencor shares, said it did not speak on stock-specific issues.

EXTRAORDINARY PROVISIONS ARE A PIVOTAL CAUSE OF THE DEEPLY ENTRENCHED COMPLACENCY