Institutional investors Allan Gray, Investec Asset Management and Sanlam Investment Management have united to oust five Comparex non-executive directors and replace them with their own nominees in a move which would give the group control of the JSE-listed company`s board.
On 13 June, Comparex chairman Russell Chambers received notice of the investors` intentions to replace the five non-executives, including Chambers, with their own nominees.
The investors chose not to call for the replacement of Warren Clewlow and fellow non-executive director, Jack Mitchell, who is an Allan Gray director.
The new board would effectively give the institutional investors, which together hold 35% of Comparex shares, a 50% representation on the board.
Comparex management informed investors this morning that it viewed the move as a concerted effort to achieve control of the company and effect a change in its strategy.
The existing board members have in turn referred the matter to the Securities Regulations Panel, saying the institutional investors are obliged to make an offer to minority shareholders.
Management also pointed out that the newly constituted board would not meet the code of conduct for corporate governance as outlined in the latest King II report.
Uys van Straaten, an analyst at PSG Online, says the move has been a long time coming.
"Allan Gray has been working on this for a while, and will probably succeed," says Van Straaten.
Comparex is currently sitting on a R3.5 billion war chest and the company has long been criticised for retaining the money, ostensibly earmarked for growth or acquisitions.
Van Straaten says the company should be given credit for not "making acquisitions left and right", but shareholders remain eager to see some tangible realisation of the cash on hand.
A critical look at the company`s struggling European operations will also be high on the agenda.
Comparex has warned that its European operations would not be profitable for the 2002 financial year and that its African operations are also not performing as expected.
"The European operations are burning cash and the institutional investors will be looking to put a stop to that. It`s a tough market out there and Comparex is up against the big boys. Competing against the likes of IBM and Hitachi with such tight margins can`t be easy," comments Van Straaten.
Should the move go ahead, Van Straaten believes the new non-executive directors will immediately implement a rescue operation which may include a brutal look at operations in Europe.
What`s more, Van Straaten says should the executive directors not toe the line, they could find their own positions at the company on shaky ground.
Investors piled into the share in early morning trade. The share shot up more than R1 or 15% to hit 805c, later correcting slightly to trade at 770c.
Van Straaten believes the institutional investors and shareholders will be looking for a dividend in an effort to realise value for shareholders in the short-term.
Meanwhile, Comparex management has taken a vow of silence, saying only that a special notice would be posted to shareholders in the next two weeks, outlining its stance on the matter.
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