Cape Town - A huge legacy issue has been lifted at troubled transport conglomerate Super Group with news on Friday that founder Larry Lipschitz will resign as CEO.
This is the view of market watchers, who believe Lipschitz - who has been blamed for driving Super Group into a deep debt ditch - needed to step away from the operational side and allow "new hands" to handle efforts to restore value to shareholders.
Super Group executive director Dheven Dharmalingam - who previously served as chief financial officer - has also resigned.
No immediate replacements for Lipschitz and Dharmaligam were announced.
A SENS announcement from Super Group said the process to appoint a new CEO was underway. Deputy chairperson and well-known lawyer, Phillip Vallet, is assuming the role as interim chief executive officer.
Initial market speculation indicates that the recently appointed operational head Adam Craker could be the new CEO. But there is also a distinct possibility that Super Group - perhaps at the behest of its larger institutional shareholders - could lure a "turnaround specialist" from outside the company.
The resignations come at a time when Super Group is finalising a massive R1bn rights issue aimed at culling the group's dangerous debt levels.
A similar board shake-up has been seen recently at clothing and textile group Seardel, where CEO, founder and major shareholder Aaron Searll and financial director Arthur Jacobsohn also stepped away following a rescue rights issue led by empowerment group HCI.
Such shake-ups are based on a premise that long-serving executives - especially the founders of companies - sometimes are too close to operations or too emotional about assets to make the tough decisions needed for an effective turnaround.
Lipschitz - who remains a sizeable Super Group shareholder - will, though, remain on the board as a non-executive director and will advise the new CEO over a transition period.
Lipschitz founded Super Group in 1986 when he purchased the small truck rental company Super Rent. He grew the company into what is widely regarded as the largest privately owned transport company in South Africa. Lipschitz listed Super Group on the JSE in 1996, and was successful in markedly growing the operating base by making a flurry of acquisitions.
The resignations are not terribly surprising with Finweek and Fin24.com recently questioning whether shareholders would be happy to allow Lipschitz to continue to run the group.
On Friday, Finweek published an article that argued that it was a major issue that Lipschitz still loomed large over Super Group.
Finweek noted that a number of market watchers believed that Lipschitz - who oversaw major value destruction for shareholders in the last three years - needs to take his hands off the wheel if Super Group is to steer itself back onto the profit growth track.
The Finweek article suggested Lipschitz was ready to step away - albeit at a later stage. Craker was quoted in the article as saying: "Larry wishes to ensure that the work we have done to create the new financial foundation is complete before he considers his next steps."
Shareholder activist Theo Botha - one of the most vocal critics of Super Group - believed the resignation of Lipschitz signalled that the company was ready to be broken-up and the operational assets sold off.
"Surely now shareholders who have been asked to support a rights issue will be hesitant in the light of the lack of depth in management in the group. This is borne out by the fact that Super Group's attorney is now the acting CEO."
In the next few weeks, Super Group should finalise details around its R1bn rights issue - an exercise that will be underwritten by its largest shareholder, Allan Gray, and a number of the company's lending banks. The latest rights issue comes only months after Super Group raised around R500m in new capital from shareholders.
Whether the emergence of asset manager Allan Gray as the dominant shareholder at Super Group might have prompted Lipschitz to step down is not clear at this point.
If Super Group shareholders do not follow their rights - pitched at 45c/share - with any enthusiasm, Allan Gray could well end up with a stake of more than 50% in the company.
Some market watchers believe Allan Gray, which is facing rather embarrassing paper losses at Super Group, is already calling the shots at the transport conglomerate.
Lipschitz's commitment to Super Group was questioned late in February by Finweek which disclosed that the CEO had not followed his rights in the initial rights issue held in late 2008.
At that time Finweek noted that some market commentators had made the "scurrilous inference" that it might have suited Lipschitz to hang back in the rights issue, as it seems the true picture about operational setbacks at Super Group only emerged after the fund-raising effort was concluded.