Further capital allocation concerns relate to GPI’s purchase of Spur shares after the initial purchase in 2014 of 10% of Spur shares via a B-BEEE transaction. In 2016, the company tried to acquire up to R779 million of Spur shares from Coronation Fund Managers at R40 per share, a 25% premium to the market price at the time. This was blocked by shareholders, but GPI continued to buy Spur shares in the open market. Spur shares now trade at R24 and management has publicly stated that it wishes to sell its stake in Spur.

In addition, the shareholders believe that management and shareholder interests are not aligned. “Total bonuses paid to executive directors amounted to R15 million in the 2017 financial year, while the group made headline losses and the dividends paid to shareholders halved,” says Winer.

The composition of the board and extended director tenures are another cause for concern. “The GPI board has five non-executive directors, two of which have been on the board for 21 years while a third has been on the board for 10 years,” says Winer. “This results in a lack of independence, especially when the existence of an executive chair (Dr Adams) on the board puts an even greater demand for independence on the remaining board members.”

Further, the current board’s skills and experience are not aligned to the company’s new strategy. GPI’s shift into the quick service restaurant (QSR) industry requires a board with relevant industry skills, knowledge and experience.

The directors proposed by the shareholders include Cora Fernandez, a CA with experience in the private equity industry and former CE of Sanlam Investments Institutional Business; Mark Bowman, former MD of SABMiller Africa; Ronel van Dijk, former CFO of Spur and COO of Spur International; and Seapei Mafoyane who is CEO of Shanduka Black Umbrellas, the enterprise and supplier development partner to, among others, Transnet, Lonmin, Anglo American, Exxaro and Mitsubishi Hitachi Power Systems Africa.

Adams does not believe the nominees have the necessary skills and experience, except possibly Mark Bowman. “They will not be a good fit.”

Ricco Friedrich, director and fund manager at Denker Capital, counters that the nominees are credible and would represent the interests of all shareholders, including small shareholders. “The community members are powerless. They have no voice to speak out against the massive destruction of shareholder value that is taking place. The share price was down 70% but rose 25% on the news that an EGM is to be held.”

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