Allan Gray and Investec have warned the new Comparex board of directors that if their strategy does not meet the expectations of shareholders it will be reconstituted again, Brainstorm magazine reports in its August edition.
On 17 June, Comparex was forced to reconstitute its board following a demand by fund mangers Allan Gray, Investec and Sanlam, which represent 38% of Comparex`s share holdings. The fund managers demanded that the non-executive directors resign and be replaced by people closer to the three institutions.
Allan Gray CEO Simon Marias says in the Brainstorm article: "We approached the board about our concerns, we felt that the strategy was just too risky and it would destroy shareholder value. They then told us to get lost."
Although the three fund management companies have insisted they did not work in concert, they were concerned enough to call for the replacement of Comparex non-executive chairman Russell Chambers and four others. They got their way and Comparex has been forced to rework its strategy.
Meanwhile, the five who stepped down are awaiting the outcome of a Securities Regulation Panel investigation about whether their forced resignations mean that Allan Gray, Samlam and Investec must now make an offer to minorities.
It was they who first called the three fund managers "the concert party". After making a statement to such an effect on 20 June, they have gagged themselves. Similarly Comparex`s executive directors and management have decided to do the same until the new strategy is announced.
The fund managers consider the move to request the investigation little more than a smoke screen for those former directors to hide their own failings.
"There is no way we want to take over Comparex or even run the company. We are fund managers and we have a duty to look after our clients` investments. In fact the shares do not belong to us, but rather to our clients," Marais says.
Comparex stands out among most IT companies because it is cash flush - it had R3.4 billion at end November. But this is what has concerned shareholders who believe the money, which is equivalent to the company`s market capitalisation as well as its net asset value, should have been put to use.
Use it or lose it seems to be the attitude of Investec`s Viljoen who says: "If they cannot do anything constructive with the money then they must give it back to the shareholders."
And giving back the money is not something the Comparex management seems too willing to do. "Since 2000 we have investigated about 200 companies, of which we had serious discussions with eight, but at the end decided not to buy any," one Comparex executive says.
Justifying the inactivity, the executive says: "Ultimately our decisions not to buy were correct, because no one else bought them either."
Attacking this logic, Marais says that seeming to be doing deals is not the correct way to run a business. "Don`t look to buy someone else if you are not running your current business properly at the moment."
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