Avmin/IDC call to reconstitute the Iscor board
21 February 2001
Rick Menell: “I am sure that other stakeholders will want an improved performance from Iscor as much as we do.”
Anglovaal Mining (Avmin) and the Industrial Development Corporation of South Africa (IDC), which between them hold 26% of the shares in steel and mining Avmin executive company Iscor, are calling a general meeting of Iscor shareholders with director Rick the intention of reconstituting the Iscor board.
Avmin and the IDC announced earlier this month that they had formed an alliance with the express intention of unlocking value within Iscor. Their first move in this direction is a proposal to convene a meeting of all Iscor shareholders within eight weeks of today, that is before April 21. The Iscor shareholders will be asked to vote on replacing certain directors.
Avmin and the IDC propose removing from the board, Iscor’s executive chairman and chief executive Hans Smith and finance director Malcolm Macdonald along with four non-executive directors – Tom de Beer, Colin Fenton, Jurie Geldenhuys, and Jan van den Berg.
In their stead Avmin and the IDC are proposing appointing six new directors. Three would represent Iscor’s two largest shareholder groupings – Rick and Brian Menell from Avmin and Tony Tshivhase, the legal adviser to the IDC. The other proposed new directors would be independent non-executive directors who are also experienced businessmen – Saki Macozoma (the former managing director of Transnet and now deputy chairman of Standard Bank Investment Corporation), Robert Barbour (the former chairman and managing director of Alusaf); and Peter Flack (former chairman of Randgold and an acknowledged turnaround specialist).
Avmin and the IDC propose that the balance of the current Iscor directors remain on the board. They are Iscor executives Dr Con Fauconnier (head of mining) and Louis van Niekerk (head of the steel business); Barlow chairman Warren Clewlow; IDC nominee Gert Gouws; independent director and Old Mutual plc director Dr Len Konar and National Research Foundation director Khotso Mokhele.
Any shareholder holding more than 10% of Iscor’s share capital can call a shareholders’ meeting in terms of section 180(2) of the Companies Act. With their combined holding of 26% of Iscor’s shares, Avmin and the IDC decided to call a meeting of Iscor shareholders to put their proposed nomination to the board to shareholders for their vote.
Avmin executive director Rick Menell explained: “At the time we acquired our holding in Iscor we said that we would explore all options to unlock shareholder value. Both the IDC and Avmin envisage that with a reconstituted board, Iscor will have the necessary characteristics including initiative, goodwill from major constituencies and the capability to implement a strategic vision that will realise maximum value for all stakeholders. We are working for the other stakeholders as well as ourselves and believe that Iscor has been an underachiever for too long. I am sure that other stakeholders will want an improved performance from the company as much as we do.”
Khaya Ngqula, the managing director of the IDC added: ”It is our view that Iscor will not flourish under its present leadership, which has alienated a number of important constituencies including the IDC, labour organisations and many of its shareholders. We believe that it is vital to inject strong and determined leadership into the Iscor board and re-invigorate the management of the company as its financial performance has been sadly lacking.
“Our view is that the current board has failed to demonstrate the elements necessary to effect the sorely needed restructuring of the Iscor businesses. We would expect strong leadership, consultation with key constituencies including stakeholders and accountability against measurable milestones. These shortcomings have been reflected, amongst other things, in the poor performance of the Iscor share price.”
He added that the IDC has over the past few years endeavoured to motivate a dialogue with the Iscor management to explore various avenues to unlock the value within the company, but ”despite our best efforts, this was not achieved”.
Mr Menell said that the alliance’s view is that, in line with international best corporate governance practice it is important to separate the roles of chairman and chief executive in a company. “We have had discussions with the Iscor management and met a blank wall on various issues to release value. Calling a shareholder meeting to reconstitute the board is we believe in the best interests of all stakeholders.”
He went on to say that some time ago Avmin recognised that the Iscor share price was trading at well below its potential value. ”When you look at Iscor’s valuation of R10,2-billion in April 1995 and the fact that it had a market capitalisation of less than R3-billion when Avmin acquired its interest, and if you believe, as we do, that Iscor is a business that has excellent assets, the Iscor share price was definitely undervalued and presented an interesting investment opportunity.
“As we see it, Iscor’s valuation has been eroded by poor operating performance which has nothing to do with the quality of its assets. Along with the IDC we believe that there is significant value that can be unlocked from Iscor by strengthening the board. This will be done by appointing independent and experienced businessmen and adding directors who will represent the interests of the major shareholders and have a great deal at stake in seeing Iscor succeed, and at the same time explore all options and turnaround alternatives. Our actions are those of any active and interested shareholder.”
Khaya Ngqula, added: ”Prior to Avmin’s investment the IDC was the single largest shareholder in Iscor and we had become frustrated with Iscor’s disappointing underperformance. It is the only one of the IDC’s large investments that is not performing satisfactorily. Our frustration has arisen because in spite of all our best efforts, we have been unable to get the Iscor management to implement ways of unlocking value for shareholders.
“We have reached a crisis point as Saldanha Steel, which is running well below design capacity, needs a further injection of funds. As partners with Iscor, the IDC does not feel comfortable investing further taxpayers’ money with the current management in place. They have demonstrated that they are not able to utilise optimally the funding for Saldanha Steel in the past and we, and our shareholders, and the State, believe will not perform under the current conditions. It is critical that Iscor effects immediate change and we believe that the change needed has to start at the top.”
General Manager, Investor Relations