Shareholder activism pays off at GPI
Shareholder activism appears to have won the day at embattled empowerment investment company Grand Parade Investments (GPI) - and this could mean a new-look board relishing the challenge of getting fast-food icon Burger King to serve up profits.
At a well-attended AGM on Wednesday evening disgruntled shareholders again flexed their muscle to block a number of key resolutions - leaving the group, in some instances, in a bind.
More than 60% of GPI's shareholders voted against adopting the nonbinding advisory vote on the company's remuneration policy, and nearly 63% opposed adopting the nonbinding advisory vote on the implementation of the remuneration policy.
Disappointed by vote
And there was more to come. Shareholders also successfully blocked four special resolutions (which required 75% support) - including on the remuneration of nonexecutive directors (27.41% against), permission to buy back shares (26%) and inter-company financial assistance (32% against).
Acting chairman and nonexecutive director Alex Abercrombie said he was disappointed by the vote. "We will have to find creative ways of dealing with these votes ."
The AGM followed hard on the heels of a tense extraordinary general meeting a week earlier at which shareholder activists - comprising Kagiso Asset Management, Denker Capital, Excelsia Capital, Westbrooke Alternative Asset Management and Rozendal Partners (representing 12.5% of GPI's issued shares) - successfully voted former SABMiller executive Mark Bowman and former Spur Corporation CFO Ronel van Dijk onto the board.
The board appointments were regarded only as a half-victory for the activists, who had nominated four new nonexecutive directors to the GPI board after expressing concerns around corporate governance oversight, lack of experience in the quick-service restaurant sector and capital allocation.
But subsequent events have shown that the activism is paying off. The big news is that turnaround specialists Value Capital Partners (VCP) have joined the fray.
VCP - well known for its efforts at Adcorp and Altron - disclosed late on Friday that it had doubled its holding in GPI to 16.62%.
Significantly, VCP is involved in the turnaround efforts at gaming giant Sun International. Arguably GPI's most valuable investments are its minority stakes in the GrandWest casino in Cape Town, the Golden Valley casino in Worcester and limited-payout machine specialist Sun Slots - all of which are controlled by Sun International.
VCP CEO Sam Sithole has been playing his cards close to his chest, and declined to speak to Business Times.
Though the GPI share price had firmed (from a low of around 175c) after the shareholder activists declared their intentions, the emergence of VCP has seen the share price shift from around 221c in mid-November to as much as 350c during the week. It seems VCP has snapped up the bulk of GPI's shares traded in recent weeks.
News of VCP's involvement more or less coincided with the unexpected resignation of GPI CEO Prabashinee Moodley just ahead of the AGM. A vote on the appointment of Moodley - the third CEO to resign at GPI in less than 24 months - to the GPI board was scheduled for Wednesday evening's AGM.
Independent analyst Anthony Clark reckoned the presence of highly experienced consumer brands directors such as Bowman and Van Dijk on the GPI board might have meant Moodley coming under intense scrutiny over the company's fast-food brands strategy.
Moodley's resignation is significant from the perspective that the new-look GPI board will decide on a new CEO with a new large shareholder in the form of VCP hovering in the background.
A presentation at the AGM by COO Mohsin Tajbhai showed GPI's immediate focus is finding a profitable recipe for its food segment.
The tone of the AGM was conciliatory compared with the previous engagements with shareholders.
Speaking after the AGM, Tajbhai noted: "The outcome of the meetings is a shared-value solution which benefits all stakeholders.
GPI welcomes the skills and experience of our two new directors, Mark Bowman and Ronel van Dijk.
We look forward to working collaboratively to unlock further opportunities for GPI and its stakeholders."
He added that GPI and its management had taken constructive steps to refocus the business on potential high-value assets and to exit poor-performing assets.
"We are also eager to engage with VCP . VCP has a brilliant business model and proven track record in business turnaround interventions which will assist GPI with its objective to unlock value for its shareholders and drive the share price to even higher levels."
Tajbhai reiterated that GPI was looking to exit investments in coffee and doughnut brand Dunkin' Donuts and ice-cream specialist Baskin-Robbins.
There have been urgent calls from shareholder activists to close down these loss-making brands as soon as possible.
The big task is getting Burger King, which now has about 90 stores, to dish up profits.
Tajbhai argued that once the market realised the true value of Burger King, the share price would re-rate accordingly.
He said plans were afoot to drive Burger King's revenue per store to R1.2m (currently R911,000) and to extend the chain to 250 stores in the medium to long term.
Tajbhai said 14 new Burger King stores were planned for the new financial year to end-June 2019.
"We have an obligation to roll out five stores a year [according to the master franchise agreement], which we can easily do."
He noted that new stores were on average performing better than those at older sites, adding that five under-performing Burger King stores were set to be closed shortly, with others waiting for leases to end.