Row accentuates how shareholder activism cuts both ways on the floor
THE long-running brouhaha at JSE-listed flooring company Accentuate highlights the double-edged sword of shareholder activism — for both activists and the company targeted.
This saga began in October 2010 when three former executives of Coronation Capital, part of Coronation Fund Managers, bought 28% of Accentuate then clashed with the company’s management.
The standoff has meant that for the past four years, Accentuate has been unable to pass special resolutions at its AGMs.
CEO Fred Platt is clearly unhappy with the activists, saying their behaviour “significantly aggravated” the effect of difficult trading conditions
This is no exaggeration: its share price at 60c is about half what it was last year, and its results for the half-year to December showed pretax profit slumped 51% to R4.4-million.
At Accentuate’s AGM in late December, it seemed there might be a breakthrough.
Letters of representation needed for the activists to vote were declared invalid, and the meeting was adjourned. When it reconvened a few days later, without the activists voting, all resolutions were passed.
But the activists quickly got an interdict to stop the resolutions being implemented.
The next instalment of the soap opera will kick off in two months when the court will rule on the validity of those letters of representation.
Adolf Potgieter, one of the former Coronation executives leading activists, said they were not looking for a fight in 2010 — just investment opportunities in small companies.
Accentuate, which owns Marley Tiles and FloorWorX, seemed attractive, partly because of government plans to build new infrastructure.
But there were already issues at Accentuate. These included onerous leases with possible related parties, bulky and expensive management structures and a murky deal in which Accentuate bought Centurion Glass & Aluminium for R75-million in 2008, only to sell it within three years for R10-million.
Potgieter said he felt these issues could be resolved quickly. “We bought 28% of the company, and thought that as the largest single shareholder we could get board representation. But they turned us down.”
He admitted that Accentuate’s management probably could not handle his request to put four directors on the board.
“We should have gone for just one director. I think we created a fear we were going to break up and asset-strip the company, but we just wanted to sort out
We just wanted to sort out the company
the company,” he said. Potgieter’s group was also concerned about the effectiveness of a few of the incumbent directors.
But when his group called a special shareholders’ meeting in 2011 to get their four directors on the board, none got the necessary 50% support. This triggered a cold war.
After that, Potgieter’s activists could block only special resolutions that require 75% of shareholder votes.
This left Accentuate in limbo, unable to get approval to provide financial assistance for its subsidiaries, to repurchase shares or even approve nonexecutive directors’ pay.
“We’ve said all along the problem can be sorted if they give us a seat on the board,” said Potgieter.
Platt said the activists’ allegations were without substance. He was sure they were intent on asset-stripping Accentuate. And he made the point that it was the shareholders — not management — who prevented Potgieter’s nominees from being voted.
He hoped September’s court ruling would sort out the mess.