A consortium, led by Trinity Asset Management, has bought a controlling stake in ConvergeNet and now aims to oust several directors, including current CEO Pieter Bouwer, in a bid to trim costs.
The buyout has been coming for some time as Trinity, which initially held 20%, was unhappy about the way the company was being run and its cost-heavy board.
Yesterday, the deal came together when the consortium bought a controlling stake in ConvergeNet's empowerment partner, Yellow Star. Together with other partners, Trinity now owns 53% of ConvergeNet, giving it a controlling stake in the listed ICT stock.
The consortium has issued an offer to minorities at 23c and will then call a shareholders' meeting to remove Bouwer and several other directors from the company's board. ConvergeNet's share is currently trading at 28c.
Cutting the fat
ConvergeNet's expenses are too high and its board is too costly, because it has 13 directors, says Trinity CEO Quinton George, one of the founders of the listed ICT stock. He wants this number shaved to six, of which four will be black.
George says Bouwer, executive director Gordon Edwards and non-executive directors Michelle Krastanov and Mpho Scott were asked to resign by yesterday morning, but failed to do so.
A shareholders' meeting will be called the day after the offer closes in a bid to remove these directors, says George. “R9 million worth of salaries are being paid unnecessarily.”
George previously expressed concerns that three or four of ConvergeNet's acquisitions have been losing money under the current executive team, a trend he says started to happen at Sizwe, ConvergeNet's largest entity.
Too many chiefs
Swana says the board became unwieldy after ConvergeNet made several acquisitions, which led to more directorship appointments. The listed company owns controlling stakes in seven companies, including Sizwe.
Discussions around the costly board have been going on for about a year, says Swana, who was one of the company's founding members. The board will be restructured, although this will take time as regulations have to be followed, he says. “Somebody has got to go.”
Three of the company's board members, including Peteni, stepped down on Tuesday. Swana says the resignations were mostly motivated by personal reasons.
Current Sizwe CEO Tim Modise has been selected as a replacement for Bouwer, says George. He adds that the consortium intends increasing ConvergeNet's empowerment stake from 20% to 30% in the future.
ConvergeNet is currently focused on running the business and making money, says Swana, who speaks on behalf of the board.
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