Nepi Rockcastle responds to call for a forensic probe
Ten of SA’s largest financial institutions want an independent probe over allegations of insider trading and unethical director conduct
Nepi Rockcastle, the JSE-listed Central and East European shopping centre owner has set up a sub-committee to respond to the call from 10 of SA’s largest financial institutions for a forensic probe into the group.
The institutions’ asset managers, who collectively manage trillions of rand on behalf of millions of investors — including the Public Investment Corporation (PIC), which looks after R2-trillion on behalf of government workers — as well as Coronation, Allan Gray, Old Mutual, Stanlib, and Prudential have sent a letter to the boards of the Resilient group of companies.
They are calling for an independent probe into Resilient, Fortress, Green Bay and Nepi Rockcastle. They want one of the top four largest auditing firms to analyse the companies from numerous angles, considering the number of allegations made against them. These include suggestions that there has been insider trading at the companies and that directors have used unethical methods to enhance their share prices.
The company said it was not aware of any specific allegations related to the business and that it was satisfied with the integrity of its business practices
A sell-off in the four companies’ shares has persisted this year and the group’s share prices are down between 40% and 60% this year.
Nepi Rockcastle said on Friday that its sub-committee will respond to the call, independent of the other three companies.
"The board of directors of Nepi Rockcastle has received a letter from 10 institutional investors, delivered via the office of Coronation Fund Managers on August 23 2018, requesting an independent investigation of all allegations made against the company, its directors and closely associated parties. The company has not yet been able to verify the shareholding of each of the signatories of the letter in Nepi Rockcastle."
The company said it was not aware of any specific allegations related to the business and that it was satisfied with the integrity of its business practices. Its board said it regards the letter and its requests "in a serious light" and has "accordingly, established a special board sub-committee to address the matter".
The members of the sub-committee are the newly elected chair of the board Robert Emslie; the chair of the audit committee Andre van der Veer; CEO Alex Morar; and the CFO Mirela Covasa.
The sub-committee is mandated by the board to engage with the signatories of the letter, who are shareholders in the company, to clarify the specific issues or concerns they may have pertaining to Nepi Rockcastle and to determine how such shareholders would like the company to investigate these matters.
It will also engage with significant shareholders that are not signatories of the letter to obtain their views on the content and requests it sets out and ascertain whether they support the requested investigation.
Finally, it will determine the scope and costs of any independent investigation and their effects on the company’s shareholders.
Jeff Zidel, a former director of Nepi, prior to its merger with Rockcastle, said any probe into the Resilient group of companies will take time and that it needs to be done at as low a cost to shareholders as possible. He said a "top-four auditing firm" would possibly charge high fees for a process that could take "two or three years. I believe that the companies and investors need to find constructive solutions."
Meanwhile, Resilient’s board also released a statement on Friday in which it said it is "considering the content of the letter received from institutional investors ... and will be engaging with them and with the company’s major shareholders in determining the appropriate course of action. Shareholders will be kept informed."