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By: Marc Hassenfuss  Source: FinancialMail

Many so-called community shareholders share dissident shareholders’ concerns about gaming vs fast-food investments.

The board of embattled empowerment group Grand Parade Investments (GPI) must surely be giving serious consideration to a settlement with a group of dissident shareholders.

Events at an adjourned extraordinary general meeting (EGM) in Athlone last week strongly suggested the unhappiness at GPI’s woeful underperformance over the past few years was not just limited to the group of professional investors — consisting of Kagiso Asset Management, Denker Capital, Excelsia Capital, Westbrooke Alternative Asset Management and Rozendal Partners.

It seems combative GPI executive chair Hassen Adams and his board have badly misread the underlying sentiment about the company.

Independent analyst Anthony Clark noted: “The first half an hour of the GPI meeting [at times] suggested the shareholder crowd was not happy at events pertaining to the call for the meeting. But it rapidly became clear that grassroots shareholders were not as pliant or supportive as the board had thought.”

Adams had, at an earlier investment presentation, issued veiled warnings to the dissident shareholders that the group’s community would not tolerate an opportunistic tilt at their beloved company. He famously cautioned: “Come and face the crowds. I’m not threatening you … but we are going to war with you …”

Adams had also positioned himself as the bulwark against the dissident shareholders: “This is my company … this is my people. I have to look after you … I must be here.”

But last week’s meeting was nothing like Adams (who did not attend, after taking ill) had predicted. The assembled GPI board faced the wrath of angry shareholders, who demanded to hear why exactly the dissident shareholders wanted to appoint four new directors.

What was abundantly clear at the meeting is that many so-called community shareholders and the dissident shareholders — which speak for 12.5% of GPI — have similar concerns.

The dissident shareholders have stressed improved board oversight as a means to unlock value at the deeply discounted GPI — hence proposals to bring on respected executives like former Sanlam executive Cora Fernandez, former SABMiller executive Mark Bowman, former Spur FD Ronel van Dijk and respected strategist Seapei Mafoyane.

Community shareholders, on the other hand, spoke bluntly (and bitterly) about the costly decision to reduce the investment in cash-spinning gaming assets in order to back loss-making fast-food brands including Burger King, Dunkin’ and Baskin-Robbins. One shareholder argued: “Gaming can no longer subsidise Burger King. What are you trying to achieve? Give us the gaming [assets] … and you can throw money into this bottomless pit.”

Clark said it was clear the mood had changed when shareholders called on dissenting shareholder Jarred Winer (from Westbrooke) to address the meeting.

“His articulate comments as to why [they] wanted change seemed to resonate with the majority of the shareholders in the hall.”

If the hostile mood of the general body of shareholders is cause for concern for the GPI board, there will presumably now also be some fretting about the way in which a large shareholder like the Chandos Trust will vote at the reconvened meeting.

The Chandos Trust — which is aligned to banking tycoon GT Ferreira — has already taken a bath on Steinhoff International. Eyebrows would certainly be raised if the trust, which represents the interests of workers, backed the current board — or even sat on the fence by abstaining from voting.

Under the circumstances, it would be difficult to imagine that Adams and his long-serving board would want to endure another fraught EGM and possibly suffer the ignominy of having board changes foisted on them.

The adjournment of the EGM, which some suspected was a well-rehearsed plan B option, will only have bought the GPI board a little time.

What’s more, the decision to adjourn the meeting — based on an informal count of hands — hardly seemed procedural.

At the time of going to press, representatives of the dissident shareholders indicated that there had been no approach about a possible settlement.

Officially, the adjourned EGM will be reconvened on December 5 in Athlone. This is just a week before GPI is scheduled to host its AGM at the GrandWest casino — an event that will take on much more significance for shareholders if the EGM ushers in board changes.

Clark believes the dissenting shareholders have now caused a groundswell against GPI.

“Adams must clearly feel he has gambled his cards badly. The GPI board must surely advise him that a combative stance is now unwise … the community shareholders have turned.” He believes the best course of action would be to engage with the major shareholders in order to narrow the large discount on GPI’s intrinsic value, for the benefit of all shareholders.

One possible unintended consequence of the extended EGM upheaval, which has now attracted mainstream media coverage, is that GPI’s deep discount predicament has become more widely known.

Despite a firmer share price since the call for an EGM, GPI — which, aside from its food ventures, owns significant minority stakes in the cash-spinning GrandWest casino and SunBet alternative gaming business — still discounts its intrinsic value by around 70%.

Predatory parties may soon start circling — and any formal approaches at this delicate stage would represent a serious curve ball for shareholders.

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