GPI: Has indicated a willingness to sell its significant minority stake in restaurant franchisor Spur Corp. Picture: Sunday Times/Masi Losi
GPI: Has indicated a willingness to sell its significant minority stake in restaurant franchisor Spur Corp. Picture: Sunday Times/Masi Losi

Sharp share price movements and an intriguing new face on the share register have heightened anticipation in the run-up to the reconvened extraordinary general meeting (EGM) of embattled empowerment group Grand Parade Investments (GPI).

The EGM, which is calling for a radical board overhaul, is set for December 5 and so far there is no indication that the showdown might be headed off by a compromise agreement.

But the uneasy lull was broken last Friday when the GPI share suddenly sparked into life, surging 15% to 255c on more than 1.3-million shares traded. By Monday, GPI had extended its gains to nearly 270c, again in decent volumes.

There have been persistent rumours that turnaround specialist Value Capital Partners (VCP) — which has moved into Sun International, Altron, Novus, Adcorp, PPC and African Phoenix — has been sniffing around GPI.

In an e-mailed response Sam Sithole, CEO of VCP, said it was not the company’s policy to make public comments about which shares it might or might not be buying or selling.

Instead, the FM’s scan through the share register turned up an intriguing new position of 200,000 shares accumulated by Sekunjalo Investments Holdings (SIH), an entity aligned to empowerment tycoon Iqbal Survé.

SIH is the majority shareholder in JSE-listed African Empowerment Equity Investments (AEEI), which, in turn, controls listed ventures like Premier Fishing & Brands and Ayo Technology Solutions.

The initial market buzz suggested Sekunjalo could be building a stake big enough to influence developments at the deeply discounted GPI. Some even suggested Sekunjalo might be riding to the rescue of executive chair and major shareholder Hassen Adams. But that seems most unlikely.

Survé discounts notions that Sekunjalo’s position in GPI is of a strategic nature, maintaining that the investment represents a pure value opportunity. "This is one of many companies on the JSE that are offering good value, and that I am looking at." Survé says he is inclined to accumulate more shares in GPI.

Even with the sudden spurt in the share price, GPI still trades at a discount of around 60% to its sum-of-the-parts value of more than 700c a share.

But market-watchers maintain that Sekunjalo’s shareholding in GPI could prove significant in the months ahead.

With a group of shareholder activists — Kagiso Asset Management, Denker Capital, Excelsia Capital, Westbrooke Alternative Asset Management and Rozendal Partners — determined to make key board changes with a view to unlocking and restoring value at GPI, there may be deal-making opportunities for an empowered investment company with cash on hand.

GPI — which needs to focus intensely on getting its Burger King operation to run at a profit — has already indicated a willingness to sell its significant minority stake in restaurant franchisor Spur Corp. The cash-spinning and perennially profitable Spur would certainly not be out of place in AEEI’s strategic investment portfolio, which already has holdings in Pioneer Foods and Sygnia.

Of course, much still depends on the EGM next week, when the nominations of four new nonexecutive directors — ex-SABMiller executive Mark Bowman, former Spur FD Ronel van Dijk, ex-Sanlam executive Cora Fernandez and respected strategist Seapei Mafoyane — will be on the agenda.

The previous EGM was postponed because some shareholders claimed they had not been properly briefed on the reasons for the board nominations. But at the time of going to press GPI had yet to issue a Sens announcement outlining why the consortium of activist shareholders was calling for board changes.

At the previous EGM, it seemed plain that most shareholders understood why the activist shareholders wanted new directors to address governance and capital allocation concerns.

A fair bit of venom was aimed at the assembled directors, which is understandable in view of GPI’s share price collapsing about 70% since 2014 levels, ongoing losses in the food businesses and a dwindling dividend.

The activists have made it clear that the new directors can provide skilled and independent oversight to ensure that confidence in GPI is restored and shareholder value unlocked.

The activist shareholders have also argued that the extended tenures of GPI’s nonexecutives have resulted in a lack of independence — especially given the existence of an executive chair, in the form of Adams.

The concerns over board independence need to be seen against the backdrop of a number of related-party transactions, including R130m of capital deployed in acquiring catering business Mac Brothers and the Grand Foods Meat Plant.

These assets have provided a negative return to shareholders and are trading in the red.

Another big issue is that total bonuses paid to executive directors amounted to R15m in the 2017 financial year and R9m in the 2018 financial year. This coincided with GPI making headline losses of R20m in 2017 and R48m in 2018 — while at the same time the most recent dividend paid to shareholders more than halved from 25c a share to 11.50c a share.

As for capital allocation, it has been estimated that GPI has incurred more than R1bn in capital expenditure — which, along with cumulative net losses in the foods division up to the 2018 financial year, almost matches the market capitalisation of the group.

Unless GPI’s board comes to the EGM with a convincing plan to restore shareholder value, a change is certain.