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Group Five And Allan Gray Continue Their Battle – But Over What?

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One of the best kept secrets on the JSE is what is really going on behind the current battle being fought out between the management of Group Five, a top construction company, and its biggest shareholder, Allan Gray, the well known fund manager.

The problem started for Allan Gray when five non-executive directors left the board of Group Five in a short space of time, without Group Five notifying shareholders in a special release.

“These resignations were a very big surprise for us. Nothing had been communicated to us as largest shareholders in Group Five and we wanted to stabilise the Group Five board. There had been a distinct lack of communications to us and other shareholders and we could not find out what the problem was,” says Chris Morkel, an investment advisor at Allan Gray.

“Hence we asked for a shareholders’ meeting on 24 July and submitted a number of names to replace the non-executive directors who had decided to stand down.”

The legal fees and PR fees on both sides must be horrendous. But amazingly, from the various releases there does not appear to be any central point of dispute.

However, there are some interesting background facts.

One is that Group Five seem to have lost the best part of a billion rand over the last two years with a corresponding slide in share price.

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But shareholders have no real idea of what is at the heart of this boardroom fight.

Perhaps some of the best clues in this vitriolic saga are contained in the latest release from Group Five’s chairperson, Philiswe Mthethwa.

“While all the non-executive directors have decided to step down, we are concerned about the approach Allan Gray has taken to date, including a demand for its directors to be nominated as a block. We also question the underlying reasons for this call for a board reconstitution.”

“Importantly, we believe that the reconstitution of the Board should not be driven by a single shareholder but that all shareholders should exercise their rights and vote for directors at the Extraordinary General Meeting (EGM) whom they believe will best protect the company’s commercial interests, relationship with critical and commercially relevant stakeholders and its general reputation in the market. To this end, both the Public Investment Corporation and Mazi Capital have provided additional recommendations.”

So despite the barrage of statements and announcements from both companies, the real truth of what is actually going on will probably be withheld from shareholders until the EGM on July 24th.

If shareholders want to find out what this corporate saga is all about, they will simply have to ask the right questions on July 24th.

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Jeremy Woods

Jeremy Woods trained for three years as a journalist on the Herts Advertiser, St Albans, in the U.K. Once qualified, he left England to work as a crime reporter on the Vancouver Sun in Canada. After three years, he worked for the Los Angeles Times as a trainee financial journalist, spending most of his time reading company accounts and finding publishable stories in them. He moved to South Africa and for the last five years in journalism worked for the Sunday Times, Business Times, as Investment Editor. He has also published a financial thriller called “Special Payments”, which was a best-seller on publication, and optioned three times for a film.


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