Group Five in cru­cial meet­ing

Share­hold­ers to talk hard

The Star Early Edition - - BUSINESS REPORT - Ka­belo Khu­malo

THE BOARD­ROOM high drama en­gulf­ing con­struc­tion and engi­neer­ing gi­ant Group Five is set for a spec­tac­u­lar end as the group’s ma­jor­ity share­holder Al­lan Gray squares off with the com­pany’s board at an ex­tra­or­di­nary gen­eral meet­ing sched­uled for to­day, with the two ac­cus­ing each other of spread­ing lies.

The meet­ing, which was called at the be­hest of Alan Gray, would see a new board con­sti­tuted as the cur­rent board led by Philisiwe Mthethwa was ex­pected to step down to al­low share­hold­ers to air their views on the Al­lan Gray pro­posal to re­struc­ture the busi­ness and elect a new board.

Mthethwa said at the heart of the dis­pute be­tween the board and Al­lan Gray, which holds a 25 per­cent stake in the com­pany, was Al­lan Gray’s pro­posal for the com­pany to re­con­sti­tute the board and its sus­pi­cion that the board had forced for­mer ex­ec­u­tives to re­sign.

“We are con­cerned that Al­lan Gray has ig­nored our se­ri­ous con­cerns over the un­der­ly­ing rea­sons for the com­pany’s re­cent poor per­for­mance, but rather fo­cused on the res­ig­na­tion of se­nior ex­ec­u­tives as if they were pushed by the board,” she said.

“It was strange to us that the same un­bundling pro­posal that was ad­vanced by the re­signed ex­ec­u­tives that was re­jected by the board now came again from Al­lan Gray and later we re­ceived an ex­pres­sion of in­ter­est of­fer from a pri­vate equity firm for the same as­sets,” Mthethwa said.

Mthethwa has been at the helm of Group Five since 2007 and said the sud­den loss of con­fi­dence in the board had left her “per­plexed” as the board had en­joyed over­whelm­ing sup­port from share­hold­ers in years gone by.

An­drew Lap­ping, the chief in­vest­ment of­fi­cer at Al­lan Gray, said ac­cord­ing to their knowl­edge, for­mer Group Five chief ex­ec­u­tive Erick Werner was fired by the board and he de­nied claims that Al­lan Gray and the re­signed ex­ec­u­tives had dis­cussed plans to dis­pose of the engi­neer­ing and con­struc­tion unit.

“Mrs Mthethwa told us in a meet­ing on April 24 that Mr Ve­mer was fired, so it is my un­der­stand­ing that he did not will­ingly re­sign.

“We did have meet­ings with Group Five ex­ec­u­tives af­ter they re­leased their re­sults over the five or more years we have been in­vested in the com­pany.

“At these meet­ings we prob­a­bly noted to ex­ec­u­tives that we thought Group Five was trad­ing be­low the sum of the parts value, but this would have been a mi­nor part of the dis­cus­sion.

“The far big­ger thrust of our ques­tions was al­ways how the con­struc­tion busi­ness could be fixed,” Lap­ping said.

First Loss

Group Five an­nounced the res­ig­na­tion of Ve­mer in Fe­bru­ary af­ter the com­pany re­ported its first six-month loss in 11 years due to an R255 mil­lion set­tle­ment with the gov­ern­ment over its role in the 2010 sta­dia col­lu­sion.

Over the past year, the com­pany’s shares on the lo­cal bourse have lost al­most a quar­ter of their value.

The res­ig­na­tion of Ve­mer be­gan a spate of other res­ig­na­tions by key ex­ec­u­tives and cul­mi­nated in Al­lan Gray los­ing con­fi­dence in the abil­ity of the board to steer the com­pany back to a growth path.

Mth­wetwa said the board had op­posed the pro­posal from man­age­ment to un­bun­dle the busi­ness as that would not un­lock value for share­hold­ers and would be detrimental to the in­dus­try’s trans­for­ma­tion agenda.

Al­lan Gray has put for­ward five re­place­ment non-ex­ec­u­tive di­rec­tors: Rei­tumetse Hunt­ley, Nazeem Martin, Nyami Mandindi, John Job and Michael Up­ton.

The group’s sec­ond big­gest share­holder, the Pub­lic In­vest­ment Cor­po­ra­tion (PIC) has for­warded the names of Fer­nan­dez and Thabo Kgogo, while Mazi Cap­i­tal has rec­om­mended Ed­ward Wil­liams and Keneilwe Moloko to be new di­rec­tors.

Mthethwa in­sisted that be­sides the board’s squab­ble with Al­lan Gary, it had en­joyed the sup­port of their share­hold­ers.

The PIC said it will make its po­si­tion on Al­lan Gray’s pro­pos­als to un­bun­dle the busi­ness known at the meet­ing to­day, while Mazi and Coro­na­tion could not be reached for com­ment.

Sek­goela Sek­goela, a se­nior spe­cial­ist for In­vestor Re­la­tions said: “The PIC has en­gaged ex­ten­sively with Al­lan Gray, other Group Five share­hold­ers and the com­pany it­self fol­low­ing the an­nounce­ment of board res­ig­na­tions.

PIC View

“The PIC will present its po­si­tion on how the Group Five board is to be re­con­sti­tuted at the ex­tra­or­di­nary share­hold­ers meet­ing and will not make pub­lic state­ments to this ef­fect at this time,” Sek­goela said.

Mthethwa said the de­ci­sion of the board to el­e­vate Themba Mo­sai to the chief ex­ec­u­tive role had also brought dis­con­tent among the pow­ers that be at the group.

“It is our un­der­stand­ing that ac­cord­ing to the suc­ces­sion plan in place, Themba would be el­e­vated to the post of chief ex­ec­u­tive.

“But his ap­point­ment ap­par­ently caused dishar­mony among some of the ex­ec­u­tives, who felt they could do a bet­ter job,” she added.

“We are happy as a board that share­hold­ers have been given the op­por­tu­nity to vote for a di­verse group of non-ex­ec­u­tive di­rec­tors rather than a pack­age of five can­di­dates as mooted by Al­lan Gray.”

Lap­ping said the com­pany had in a let­ter to Group Five ex­pressed their full sup­port to Mo­sai and the ex­ec­u­tive team.

Al­lan Gray has in re­cent months taken the fight to boards of com­pa­nies in which it holds a sig­nif­i­cant in­ter­est .

PHOTO: SIMPHIWE MBOKAZI

Group 5 of­fices in Wood­mead, Wa­ter­fall Es­tate, north of Jo­han­nes­burg. An im­por­tant meet­ing is planned for to­day.

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