Clean-up mission for EOH boss Van Coller after founder exits
● The departure of founder Asher Bohbot, who built EOH Holdings into a multibillion rand empire, will not delay the restructuring of the technology group, said CEO Stephen van Coller this week.
The former banker, who has the mandate to chop and change at what is now an unwieldly conglomerate, has been in the hot seat for only five months. And the seat has been piping hot.
He is fighting on two fronts.
First he needs to reassure shareholders, employees and clients that a flurry of reports about questionable contracts and alleged corrupt dealings with public sector clients are not the norm.
These concerns have wiped nine tenths off EOH’s share price in less than three years.
Second, and probably more importantly in the long run, he is tasked with building the box of Lego that is EOH into a structure investors want to play with.
“It’s a bit like driving down the highway at 120km/h and servicing your car at the same time,” he said after the company’s AGM on Thursday.
The past few weeks have been a case study in damage control.
Eskom, late in January, included EOH in a list of reportable irregularities, only to later clarify that an investigation in the technology company’s conduct had been concluded last year and without anything sticking to EOH.
And earlier this month, the mighty Microsoft gave notice that they are ending a channel partner agreement with one of EOH’s subsidiaries.
TechCentral later reported it was because the US Securities and Exchange Commission was investigating a complaint by a whistleblower about an SA department of defence software deal.
Van Coller said he is engaging with Microsoft’s leadership to get more clarity on the reasons for the move, but given the involvement of the SEC Microsoft has not been able to share or confirm any details.
Though the subisidiary’s sales of Microsoft licences is a modest part of EOH’s business, Van Coller takes it very seriously.
“It’s financially small, but if you don’t sort it out, there could be contagion,” he said.
That is why he is combing through deals past and present to see whether there are more surprises.
With nearly two decades of constant acquisitions, Bohbot grew the company into the 270 entities it comprises today.
He stepped down as CEO in 2017, but came back from retirement to chair the board after a series of reputational wobbles that knocked investor confidence.
To adhere to the King IV Report’s corporate governance guidelines, he should have cooled off for longer, but he had no choice but to steady the ship, he told Business Times this week.
The aim, he said, was to eventually place the business on a better corporate governance trajectory.
“I’m sure that even Stephen’s children know the King IV (code on governance),” Bohbot quipped, shortly after he resigned as chairman.
And the founder knows what pain the other investors are experiencing — his stock in EOH was worth more than R1bn less than three years ago, but the stake’s value has dwindled to about R100m.
Fellow-founder Rob Sporen stepped down from the board as well this week, also to get a better ratio of independent directors to former insiders, according to Bohbot.
And the breakneck pace at which EOH morphed into a group that services tech needs of about 90 of SA’s top 100 companies, came at a cost. The required checks and balances did not grow at the same clip.
A few of EOH’s 12,500 employees are now endangering the future of the entire group, said Bohbot.
In a Donald Trump-inspired moment he said that EOH is a “great” business.
Van Coller struck the same note in a letter to stakeholders earlier this month. He took his first 100 days to understand the reasons for various allegations and negative sentiment from the past, he wrote.
As if steeling itself for further bad press, the company this week issued what looks like an open-ended cautionary announcement on SENS.
“EOH cannot respond each time the media publishes information on the back of their information, but shareholders will be provided with responses to relevant media coverage and advised of developments as appropriate, subject to legal advice.”
Law firm ENSafrica is now combing through five years worth of old bids and also overhauling EOH’s approach to doing deals — this is to ensure that future contracts can be trusted. They should be done by July, said Van Coller.
And he has already stopped a few bids as growth at all costs is not his aim.
Van Coller wants to integrate the myriad businesses better.
“They got into acquisition after acquisition without properly integrating them,” Van Coller said.
The earlier businesses, when EOH was more focused on ICT were strung together in a better way than the later infrastructure acquisitions.
This is the split he sees for a rejigged EOH: an ICT unit; an infrastructure and business process outsourcing unit; and a number of industry specific tech businesses.
The last gaggle of businesses is the exciting part.
“They have nothing to do with the rest. We need to take them out and let them scale,” said Van Coller.
After a decade as the head of Absa’s corporate and investment bank, he seems very keen on this part of his job: finding some of EOH’s hidden gems and letting them shine.
But the battle to turn investor sentiment positive, will be an uphill one.
Gryphon Asset Management, for example, does not see EOH as an investment option anymore, more as a speculative stock.
“There are too many allegations that are going to take years to unravel,” said portfolio manager Casparus Treurnicht.
To tread into such a minefield, a new CEO might need a bit of an altruistic streak.
“They couldn’t afford to pay me my banking salary, so I am seeing this stretch, from 52 (years old) to 60 as a last hurrah, as a way of giving something back,” said Van Coller.