Boardroom coup: engineering chaos at PSV Holdings
At the AGM of JSE-listed engineering firm PSV Holdings, ousted CEO rallies support to take back control
Chances are you’ll have missed it. But perhaps the most dramatic AGM in recent corporate history took place last week at little-known engineering company PSV Holdings, near Joburg’s OR Tambo airport.
There, founder Abie da Silva, who was forced to resign as CEO in October, pulled off a coup: he rallied enough shareholders to take back control, and vote off every single director up for election.
So, resolutions to reappoint chair Anthony de la Rue, acting CEO Carlos Fernandes, CFO Roger Pitt and nonexecutive Douglas Lorimer all failed to pass, after getting just 43% of the vote.
PSV seemed in chaos this week when contacted by the FM. Asked who the CEO was, one of the secretaries said: "We’re not too sure — we’ve recently been through a lot of changes." What’s clear, she said, is that De la Rue is "no longer part of us". It now seems likely that Da Silva will return as CEO.
It’s a unique event. Says Chris Logan, chief investment officer of Opportune Investments: "I’ve certainly never seen that before in SA."
David Woollam, a former banking executive and shareholder activist, described it as "amazing".
It was remarkable, not least because Da Silva turned the tables on the investors who ousted him last year from the company he founded in 1988, mainly to supply pumps and valves to mines, which listed on the JSE in 2006.
By March, Da Silva only owned 13.5% of PSV. But he teamed up with entrepreneur Aldworth Mbalati, who bought 25% of PSV in recent weeks, to stage the unexpected coup.
Mbalati confirms as much to the FM. "Abie and I felt the current management weren’t doing the right thing, so we clubbed in our equity, and got shareholder support to take PSV in a new direction," he says.
Intriguingly, Mbalati bought his shares from Calculus Capital — the private equity arm formerly known as Genesis Capital Partners, which is battling to distance itself from an embezzlement scandal involving former director Martin Levick. Calculus MD Darren Shur says the deal has been struck with Mbalati, but still has to be finalised. "[We] gave [our] proxy to Aldworth Mbalati to vote at the recent AGM," he says.
Shur says Calculus’s sale is unrelated to the issues with Levick, who faces criminal and civil claims for allegedly ripping off investors of more than R700m. "PSV constitutes a tiny percentage of our overall assets and is no longer a sector of focus for the group," he says.
PSV’s falling share price, down 26% over three years, won’t have helped.
Mbalati says PSV’s shareholders tried to raise concerns with the board for months, but were ignored. "True, I don’t think the board anticipated what happened at the AGM, but based on the level of arrogance that was prevalent, they should have expected something was coming," he says.
After the dust settled, PSV issued a statement this week confirming that Mbalati, Da Silva and Phillip Peterson would become directors to fill the empty board.
It’s a triumphant return for Da Silva. Mbalati says the shareholders ousted him because they believed they had a new strategy that would work. "But if you look at the financials between now and then, it doesn’t look any better," he says.
That’s no exaggeration.
For the year to June, PSV made a bottom-line loss of R25.9m, if you include two "discontinued operations" — Turbo Agencies Botswana and Engineered Linings. It burnt through R20.3m in operating cash flow.
In its 2019 annual report, Fernandes said PSV "endured an extremely challenging 12 months, with substantial financial losses against a background of extremely difficult trading conditions".
Still, it seems nobody expected this to happen.
Merchantec, PSV’s designated adviser, was also caught off-guard. Merchantec director Marcel Goncalves says he’s never seen this before. "It was quite a surprise to have this happen at an AGM."
Pitt, who until last week was CFO, was tight-lipped. "I don’t have time to talk," he said. Contacted later, he said: "It’s not really a conversation I’m wanting to have."
In particular, Mbalati says his shareholder group wanted PSV to be far more aggressive in cornering the liquefied natural gas (LNG) market — particularly in African markets. But they wouldn’t bite.
"We can do something phenomenal with this company. There’s a lot of scope to become a big industrial player in this country," he says.
In PSV’s case, the entire company is worth just R102m — even after the 22% rise in the share price last week. That’s less than an eighth of what Markus Jooste was paid as CEO of Steinhoff over the years.
But Mbalati believes the company could grow fiftyfold in value to R5bn within five years. And that growth, he says, lies in the gas industry, rather than its industrial supplies division.
Mbalati, it seems, aims to leverage one particular competitive advantage: he is the only person in the country right now who has an import licence for LNG.
Of course, Sasol and others have rights to import the more common liquefied petroleum gas, but both can be used as a fuel source.
But if PSV has such big plans, it must get its governance right. Until now, it has been chaotic.
In February, Tony Dreisenstock resigned as CFO and was replaced by Ian Schmidt. Schmidt lasted just two months before he also headed for the door.
Such ructions are common at under-the-radar companies listed on the JSE’s AltX. However. if PSV has ambitions to grow fiftyfold, it won’t want the events of the past week to be repeated.