PPC row flares as Foord bats for Ketso

19 October 2014 - 02:06 By ANN CROTTY
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IN an unprecedented move that could resolve the standoff at PPC, Foord Asset Management (FAM) will ask the board of the 120-year-old cement producer to convene a special shareholders meeting to elect a new board.

IN an unprecedented move that could resolve the standoff at PPC, Foord Asset Management (FAM) will ask the board of the 120-year-old cement producer to convene a special shareholders meeting to elect a new board.

Foord, which at last count held 7.6% of the cement producer, launched a broadside at PPC's board for the ham-fisted way in which it dealt with the surprise resignation of CEO Ketso Gordhan three weeks ago.

Gordhan was unable to work with one of the other executives, widely reputed to be finance director Tryphosa Ramano, but the board blocked his plan to "exit" her from the company.

"We could have decided that there is too much going on, and sold our shares and walked away," said Daryll Owen, deputy chief investment officer at Foord, describing the course of action traditionally taken by investment managers facing a complicated and potentially value-destroying situation.

"But we believed that the previous leadership was good for the company and good for South Africa. We bought into the whole Africa story," said Owen.

Since Gordhan's departure on September 22, PPC's stock tumbled 14% to Friday's R27.75.

After he quit, Gordhan suggested he would return "under the right circumstances". This created a boardroom standoff with Gordhan apparently pitted against Bheki Sibiya, who took over the role as executive chairman to fill the void.

While the Public Investment Corporation (PIC), which held 11% of PPC, said it gave its "total support" to the board, Foord became the first large investor to announce a position, which would appear to favour Gordhan's return.

Owen stressed that this unprecedented move was not an issue of Foord siding with either Gordhan or Sibiya, but of putting in place an effective board that could oversee implementation of the strategies initiated by Gordhan.

"We would like to see some new directors on the board. It is then up to the board to select a CEO."

Owen said that as shareholders of PPC and stewards of clients' funds, Foord was concerned about the PPC board's recent conduct and decisions.

"We believe very strongly in high levels of corporate governance, and feel that shareholders need to stand up and take action when necessary. There are PPC employees, executives, shareholders as well as project partners in Africa that are dissatisfied with the actions taken by the board in managing the current situation," he said.

Owen said it was of critical importance for the PPC board to "be replaced with a functional board as soon as possible in order to restore continuity to the operations, to its strategy and reinstil confidence to the employees at PPC".

Foord now has the backing of more than 10% of PPC's shareholders, which means PPC will be obliged to convene the special shareholders meeting under the Companies Act.

Ahead of the meeting, shareholders will be presented with a list of nominees for election to the board at the meeting.

Charl Kocks of Ratings Afrika described the move as "extremely unusual", saying that "it's logical it's happening, but sad it has to happen". However, he said it was encouraging that a large shareholder was using company law to enforce its rights.

Foord's move resuscitates the chances of Gordhan returning to the company, something analysts believed unlikely after the PIC's public statement of support for Sibiya's board.

Early this week, advertisements for a new CEO appeared in major business publications. On Friday, the company announced that it had hired Darryl Castle as an independent nonexecutive director. Owen said that he welcomed Castle's appointment.

According to Owen, Castle has had extensive mining industry experience and was one of Foord's recommendations.

When contacted, PPC would not comment on Foord's move.

"PPC would not be drawn on commenting on the details of its interaction with shareholders as it feels it is a matter between the company and its shareholders," said a spokesman.

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