a grand parade of activists
19 December 2018
By Marc Hasenfuss Source: Financial Mail
Finally, after many false starts, shareholder activism on the JSE may have come of age in 2018. While activism is commonplace in other markets especially the US the JSE has for the past few years had only sporadic bouts of corporate confrontation led by individuals like Theo Botha, Chris Logan and more recently the disarmingly astute Albie Cilliers.
But companies often shrug this off, especially if the activist cannot get the support of at least some major investors.
That was probably initially the case at Grand Parade Investments (GPI), an empowerment company that holds the local franchises for Burger King, Dunkin` (Donuts) and Baskin-Robbins, as well as 17.5% of steakhouse chain Spur. GPI has been trading at a woeful discount to its intrinsic value, and looked at risk of losing its dividend appeal because of ongoing losses in its food division.
After several individual shareholders tried, and failed, to trigger the urgent response needed to restore the market`s faith, a consortium of entities rallied at the GPI board to spark change. These shareholders Kagiso Asset Management, Denker Capital, Excelsia Capital, Westbrooke Alternative Asset Management and Rozendal Partners represented just 12.5% of GPI.
GPI`s response was to label the activist grouping as `asset strippers` that were not acting in the best interests of the group`s com- munity shareholders. It was not exactly the high point of Hassen Adams`s far-from-flawless tenure as executive chair. Even more disgracefully, there were attempts to paint the activists as agents of white monopoly capital.
But the vacuous rhetoric wasn`t enough to snuff out overriding shareholder concerns about wasting value.
Ultimately, the activists` well-articulated grievances concerning governance, capital allocation and lack of quick-service-restaurant skills resonated with shareholders. In the end, the activists gathered enough support to vote two directors former SABMiller executive Mark Bowman and former Spur CFO Ronel van Dijk onto GPI`s board as nonexecutive directors. This also paved the way for the emergence of turnaround specialists Value Capital Partners as a shareholder with a 16% stake.
As a result, shareholder value has started to creep back, rising 30% in the month to mid- December. Of course, much more has to be done to unlock value but arguably the bigger reward for all investors on the JSE is that the successful stab at GPI may inspire others to pick up the assegai of activism.