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Views Article – Sharenet Wealth

Share Picks, South Africa

Group Five: The Allan Gray Investment Plot Thickens

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There is only one name for listed shareholders if they have Allan Gray holding a major block of their shares. And that is “Lucky”.

Let’s look at what Allan Gray has done for the shareholders in Group Five, who a few months ago were battling with top management.

Allan Gray, who had obviously researched the company well, bought some 25% of Group Five, and became its largest shareholder.

After talks with Group Five’s board at the time, Allan Gray investment executives became confused and dissatisfied. They obviously had plans to turn the company around but could not find like-minded directors to back them.

Frustrated and getting nowhere, Allan Gray decided to call an extra-ordinary general meeting where they were fundamental in replacing the entire board.

That was, to all intents and purposes the end of the brief conflict between the two sides. And, with mission accomplished, Allan Gray and Group Five went comparatively quiet. Then last week, Group Five and its new board, put out an announcement that made us all blink. 

Group Five said in a SENS announcement that Greenbay, a JSE-listed company, had offered to buy in a Firm Intention Letter the offshore assets of Group Five for a cash price of R1.6 billion. 

The news surprised and delighted Group Five shareholders.

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While extremely smart, investment analysts are not always very good at telling the whole story. There are obviously good investment reasons for this. I spoke to the PR department at Allan Gray, but they were reluctant to discuss the deal “any further at this point in time.” 

For instance, I wanted to know whether this R1.6 billion deal was potentially “on the cards” before the board was fired. I also wanted to know if Group Five is going to be an effective listed cash shell with R1.6 billion in it. And lastly, I would have loved to know what the plans for Group Five are, minus assets and plus cash. 

While I’m sure these are relevant questions, they were not questions that Allan Gray wanted to answer at that moment. 

One has to respect Allan Gray’s caution, based on what they have already achieved. A great deal, Allan Gray ­- and we look forward to plenty more of your incisive thinking.

cta


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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