Johannesburg - The board members of gaming investment company Real Africa Holdings (RAH) endured an intense interrogation from minority shareholders - including two former executive directors - at an annual general meeting (AGM) on Wednesday.
The RAH board was openly accused of doing nothing to grow the business and acting at the behest of 64.6% shareholder Sun International.
Sun International acquired a controlling stake in RAH in 2005 when it unsuccessfully attempted to buy out minority shareholders. The RAH board currently includes two Sun International executives - CEO David Coutts-Trotter and financial director Rob Becker - as well as Sun International chairperson Valli Moosa.
Former RAH CEOs Danie Vlok and Pierre du Plessis were highly critical of the RAH board's seeming determination to sit on its current gaming investments - comprising minority stakes in casinos in Durban, Cape Town, Gauteng and Port Elizabeth - when opportunities to increase value to shareholders abounded.
Vlok reckoned the composition of the RAH board prejudiced minority shareholders, contending that most members were aligned to Sun International. RAH chairperson Vali Moosa refuted this, pointing out that a new board appointment that would ensure additional independence was under consideration.
Vlok, who raised the same issue at last year's AGM, was not easily placated.
"I do not regard any of the board members as independent. We've made no progress... you are giving the same answers as last year. The board acts in the interests of Sun International."
Vlok's most pointed question concerned why the RAH board had not considered buying back its own shares - a move that could add value for all shareholders.
Vlok, noting that Sun International had borrowed money to increase its RAH stake, asked why the RAH board did not consider a similar move. Moosa said it was a difficult question to answer.
Shareholder activist Theo Botha told Moosa that Vlok's questions around the share buy-back issue highlighted a conflict of interest between RAH and Sun International. "Get an independent director...minority shareholders need protection. Mr Vlok raised this question last year already...you need to apply your mind."
Vlok continued to pester Moosa with the share buy-back question. "Why don't you want to buy back your own shares? Surely it's in everyone's best interest?"
Moosa responded rather unconvincingly that: "If shareholders wanted to give the board the authority to buy back shares they must do so."
Vlok also questioned RAH's investment strategy, which - according to the annual report - revolved around retaining its core investments and supporting their long term growth.
Vlok asked how RAH was going to grow and develop its investments. "Are we looking at other investment opportunities in the gaming sector? Or are we only going to keep the assets we have?"
'No growth plans'
Coutts-Trotter stressed there were no plans to build on the company's investments, and that the intention was for RAH to stay in the assets it already owned.
Clearly perplexed, Vlok asked: "What is the board doing? What are you actually doing?"
Moosa argued that the board had to be mindful of its shareholders. "Any [investment] consideration would need to be done with shareholder support."
Vlok argued the board should act in the best interests of the company and not shareholders. "That means growing and developing the company. But it seems you can't do anything without the support of Sun International."
Well-known asset manager Chris Logan described RAH as "an inefficient anomaly that was at odds with the interests of shareholders, and sorely in need of restructuring."
Logan asked whether Sun International had issued a directive that RAH could not make new investments or embark on exercises to enhance shareholder value.
Coutts-Trotter recalled that when Sun International made its buy-out bid for RAH, shareholders who chose to remain aboard were warned there would be a change of strategy in the company.
Logan was less than impressed: "A 60% shareholder cannot restrain the company...I want that noted."
Aside from proposing a share buy-back exercise, Du Plessis also asked whether RAH had considered buying shares in black-owned gaming investment company, Grand Parade Investments (GPI).
'Not provoking conflict'
GPI holds a major stake in SunWest (the operator of the GrandWest casino in Cape Town), a 30% stake in RAH and a 90% stake in limited payout machine operator Thuo Gaming.
It is a well know fact that GPI's cheeky tilt at RAH last year angered Sun International - purportedly prompting the removal of GPI chairperson Hassen Adams from the Sun International board.
Du Plessis pointed out that an exercise involving buying GPI shares would allow RAH to effectively buy back its own shares as well as garner more shares in SunWest (which operates the GrandWest casino in Cape Town) at a bargain price.
Coutts-Trotter dismissed this suggestion, arguing that GPI was not invested in businesses that RAH would necessarily want. "We don't want to provoke conflict with a major shareholder in some of our major assets."