Shareholders rattled by corporate scandals and corruption, says veteran businessman
Metair walked away from a once-in-a-lifetime opportunity to buy battery maker TAB for €300m after shareholders gave it a thumbs down
The Steinhoff corporate scandal and ongoing revelations of private- and public-sector corruption have heightened shareholder activism and risk aversion, says Metair chair Brand Pretorius.
Pretorius, a former CEO of motor retail group McCarthy Limited, said the recent developments had resulted in “serious erosion” in the trust and belief in government and business.
“Shareholders require boards to remain fiercely independent and vigilant, highly engaged in strategy formulation and focused on effective and responsible allocation of capital. Corporate governance is under the spotlight and a more inclusive and transparent approach to governance and business is a necessity,” Pretorius said in Metair’s 2018 annual report.
The listed battery and automotive components maker recently tasted shareholder vigilance, resulting in its 2018 decision to drop a bid to buy battery maker Tovarna Akumulatorskih Baterij (TAB) for €300m.
When the company announced its plans in June 2018, CEO Theo Loock said acquiring the Slovenian firm would be value-enhancing.
TAB’s assets included after-market automotive battery manufacturing facilities in Slovenia and Macedonia, an automotive after-market battery distribution network throughout Europe, as well as a global industrial battery business, and an energy storage business.
But barely two months later Metair announced it was walking away from what it said was a once-in-a-lifetime opportunity to lay its hands on TAB.
At the time, Metair, which supplies batteries to all major original equipment manufacturers (OEMs) in SA, Europe, Romania, Turkey and Russia, said the rand price of the asset had soared and the company was no longer comfortable with the price.
The group said in the annual report that “unfortunately, the potential acquisition leaked into the market while SA was recovering from some of the biggest corporate failures in its history. In Metair’s own trading environment the threat of a pending trade war between the US and Turkey led to a dramatic devaluation of the Turkish lira. Against this backdrop, we were unable to secure broad shareholder support and the transaction was abandoned.”
As a result, Metair’s non-executive directors now have discussions with the company’s shareholders “to improve our understanding of their needs and concerns, as most shareholders in SA have become extremely risk averse and particularly critical of business ventures in foreign jurisdictions”.
Following the discussions with shareholders, Metair has since January 28 been reviewing its strategy, said Pretorius. The company hopes to complete the review by the end of this month. The successful execution of Metair’s long-term strategy is only possible with shareholder support, he said.
“Winning organisations have an embedded culture of innovation, low resistance to change and a bias for action. These attributes are particularly important in the automotive industry, where the pace of technological development has accelerated vastly,” Pretorius said.
Loock said discussions with shareholders focused mainly on corporate governance, remuneration, capital allocation and strategy. “Metair welcomes these developments as they bring shareholders and the company closer together and help to ensure the necessary alignment,” he said.
Since 2012, Metair has grown its international footprint mainly on the back of the acquisitions of large battery manufacturers Rombat in Romania and Mutlu Akü in Turkey.