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Grand Parade Investments chair vows to ward off 'hostile takeover'

Oct 11 2018 19:09
Carin Smith

Dr Hassen Adams, executive chair of empowerment JSE-listed company Grand Parade Investments (GPI) [JSE:GPL] is determined to ward off what he calls an attempted hostile takeover by some minority shareholders.

GPI holds the master franchise for Burger King in SA and has investments in, among others, the GrandWest casino property, Sun Slots gaming, Spur and Baskin-Robbins.

In a SENS announcement in September shareholders were notified of an extraordinary general meeting (EGM) to be held at the end of October 2018.

This followed failed attempts by a group of minority shareholders - who in aggregate hold 12% of GPI shares - to engage with the board in what they deemed to be a constructive manner.

The minority shareholders are concerned about governance, poor results and the departure of several key executives over the past 18 months.

The shareholders want to elect four new non-executive directors to the GPI board to provide 'skilled and independent oversight'.

In a statement issued on his behalf on Wednesday, Adams said up to now GPI has remained 'tight-lipped about the attempted hostile takeover' by five fund managers - Denker Capital, Rozendal, Westbrook, Kagiso and Excelsia.

Adams regards the move as an attempted takeover 'under the guise of shareholder activism'.
 
"We will systematically push back against short-term opportunistic agents of greed and will continue to protect our community shareholders," Adams said in the statement.

“It has always been about creating long-term, sustainable value. GPI has paid dividends without fail every year to its shareholders and has not once come back to shareholders to ask for financial support."

He appealed to all shareholders to support him by attending a special general meeting called by the 12% minority shareholders on 31 October at 18:00 at the Samaj Centre in Rylands, Cape Town.

12% minority view
 
"After a period of good performance which largely came from the company’s success in the gaming sector, the share price has declined by more than 70% from 2014 levels," the minority group claims in a statement.

In the view of the minority group this has resulted from poor execution on GPI's food strategy; concerns around capital allocation; and governance.

GPI reported headline earnings per share losses in 2017 as well as a significantly lower dividend.

The minority group is, however, of the opinion that significant value can still be unlocked for all shareholders through improved corporate governance.

The minority group is concerned about board independence and the remuneration structure. Total bonuses paid to executive directors amounted to R15m in the 2017 financial year, while the group made headline losses and the dividends paid to shareholders halved, says the minority group.

The minority group also believes the current board’s skills and experience is not aligned to the company’s strategic intent.

"GPI’s shift into the quick service restaurant (QSR) industry and the reduced exposure to its gaming assets require a board with relevant industry skills and experience," claims the minority group.

The minority group further claims estimates indicate that GPI has incurred about R1bn of capital expenditure and cumulative net losses in the foods division up to the 2017 financial year, which combined equate to around 100% of the current market capitalisation of the company.

Further capital allocation concerns of the minority group relate to GPI’s purchase of Spur Corporation shares after the initial purchase in 2014 of 10% of Spur shares via a B-BEEE transaction.

In October 2016, GPI announced it had agreed to buy up to R779m of Spur shares from Coronation Fund Managers at R40 per share or a 25% premium to the market price at the time. Shareholders blocked this transaction.

"GPI, however, continued to buy Spur shares in the open market and last reported to own 17.79% shares - but offering no tangible strategic rationale for this," states the minority shareholders.

"Management has publicly stated that GPI now wishes to sell its stake in Spur. At current market prices, this would mean selling them for below GPI’s average cost price."

* In another matter relating to Adams, the Western Cape High Court has ordered on Wednesday that Adams be removed with immediate effect as trustee of the Hout Bay Development Trust, which he was instrumental in founding in 1996. It is as yet unclear whether Adams intends to appeal this judgment.

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