Pallinghurst listens, acts
But new executives and operating company plan are still not enough for some shareholders
Pallinghurst Resources is responding to shareholder dissatisfaction by becoming an operating company, applying for a primary listing on the London Stock Exchange and appointing new executives.
Before this week’s annual general meeting, several shareholders expressed concern about Pallinghurst’s prolonged share-price underperformance, particularly compared with management remuneration.
The private-equity company with investments in the mining sector is chaired by Brian Gilbertson, who was instrumental in forming BHP Billiton.
Shares in Pallinghurst, which has its primary listing in Johannesburg, are 300c. They were listed in 2008 at R10.
After making a takeover offer for gemstone miner Gemfields, Pallinghurst now owns almost 90% of the shares. It also has stakes in Sedibelo Platinum and Tshipi Borwa manganese mine.
Shareholders were planning to vote against reappointing nonexecutive directors Clive Harris and Stuart Platt-Ransom, but Harris and Platt-Ransom resigned before the meeting.
Gilbertson said Pallinghurst’s management held extensive engagements with shareholders ahead of the meeting to vote on the Gemfields offer and at which a new structure and remuneration proposal were also presented and approved.
They had not raised concern about remuneration and the first he had heard of discontent was from media reports.
Under the new structure, Gilbertson is chairman, Arne Frandsen CEO and Andrew Willis finance director. Gilbertson’s son Sean becomes chief investment officer and Priyank Thapliyal chief operating officer.
Pallinghurst would integrate Gemfields with its business to maximise cost savings and develop it, Frandsen said.
But some shareholders, speaking on condition of anonymity, said they were not happy with Gilbertson’s new plan as it did not address the nonalignment of management and shareholder interests.
James Regout, head of international private equity at Old Mutual Alternative Investments, said it "notes Mr Gilbertson’s statement that he shall ‘seek to engage promptly with those shareholders [who voted against], to establish and address their concerns’. We urge Pallinghurst to indeed engage promptly and not merely by way of ‘keeping shareholders updated on our continued actions’, as Mr Frandsen put it."
Regout also said: "Given that shareholders have, after 10 years, nothing to show for their investment, it is well overdue to reassess the direction of the company and probably its management structures. An overall clear alignment between all stakeholders is crucial and reinforces the stakeholder inclusive approach to governance as required through King 4."