GPI said last week that the shareholder concerns stemmed from the Extraordinary General Meeting held on October 31 in Athlone, which ended in the meeting being adjourned.
The reasons for the meeting being adjourned were that in the first instance, the shareholders at the meeting objected to the meeting proceeding on the basis that they did not have sufficient information to exercise their vote.
Secondly, the non-executive directors indicated that they were not furnished with reasons from the dissident fund managers for their proposed removal, in line with recent case law.
GPI said that subsequent to the adjournment and on November 9, the dissident fund managers addressed a letter to the non-executives which purported to contain the reasons for their removal.
The letter was also sent to the JSE, the company secretary of GPI and its sponsor.
GPI said the letter received from the dissident fund managers represented a one-sided view and was directed to the non-executives and in the company’s view did not strictly constitute “further information” as intended.
“Our intention is to present a balanced view. With this in mind, the company deemed it inappropriate to publish the letter on SENS without the responses from the concerned directors.”
Responding to several concerns from shareholders about GPI governance, such as extended director tenures and related party transactions, GPI’s response was: “The concerned directors have all been elected to office by shareholders, time and again with overwhelming shareholder support.
“Some of them as recently as at the last annual general meeting of the company. Many of them come from the original community constituencies which formed the original investor base of the company and which are still investors in the company and they are exponents of the ethos and principles of the company,” said GPI.
GPI said it was strange that some of the dissident fund managers have voted for the existing board in previous meetings and now wanted to change the board.
“Furthermore, no adverse findings have been levelled against GPI. The allegations levelled are therefore spurious and completely unjustified. Many of the related party transactions such as Grand Slots and the sales of shares in Sunwest have been highly beneficial to GPI.”
Regarding shareholder concerns about GPI capital allocation decisions and poor financial performance, GPI said that Burger King South Africa, launched in 2013, was now valued at approximately R1billion.
In 2014 GPI was trading at an all-time high, driven by the expansion of Burger King through corporate owned stores.
“We now feel very confident that the asset is mature and in a sweet spot based on the positive same-store sales growth in a depressed economy, the positive earnings before interest, tax, depreciation and amortisation levels and the massive potential for growth in South Africa.
“We have adopted a value-based strategy which has prioritised capital to high value potential assets, such as Burger King and the Meat Plant,” said GPI.
GPI added that it was important to highlight some of the successes of GPI’s investment strategy and capital allocation, for example, GPI Slots, which GPI started, operated and later exited at a valuation of over R1bn.
Responding to the concern that the Spur purchase and sales decisions highlighted poor capital allocation, GPI said the Spur acquisition has always formed part of the company’s strategy to diversify GPIs investment portfolio beyond the gaming and leisure industry and to become a serious contender in the food sector.
GPI also saw the opportunity to create synergies between Spur and its manufacturing businesses which have been successfully realised.
“GPI has been very clear in communicating this strategy ever since the initial Spur B-BEEE transaction was done as preference shares in 2014. We are the largest shareholder in the Spur Group, and we firmly believe that it is one of the best food businesses in the country.
“Despite the current, low trading environment, which is currently the case with most other businesses in the food sector, we are confident that this investment will unlock long-term future value for our shareholders,” said GPI
The dissident fund managers have also referenced the discount that GPI trades to its intrinsic net asset value (NAV), but it is important to highlight that this intrinsic NAV has been created over many years, in line with GPI’s long-term strategy, by the very board that is now being asked to leave.