[2008-10-13]  Dissolution of the Board of Directors
KINGDOM Meikles Zimbabwe (KMAL.ZI) majority shareholder John Moxon is calling an extraordinary general meeting for October 23, 2008, to have Group CEO Nigel Chanakira, and non-executive directors Rugare Chidembo and Callisto Jokonya, removed from the board.
Insiders on both sides confirmed to GMRI Capital that the fallout centred on Cape Grace being sold to Mentor Africa, currently an investment shell being run by former Mvelaphanda CEO Stephen Levenberg, who would apparently get a 22 percent "promoter's fee" for the transaction
Insiders on both sides confirmed to GMRI Capital that the fallout centred on Cape Grace being sold to Mentor Africa, currently an investment shell being run by former Mvelaphanda CEO Stephen Levenberg, who would apparently get a 22 percent "promoter's fee" for the transaction
Such a high fee is unheard of in most markets. An informed source confirmed to GMRI Capital that the KMAL CEO tried to stop the sale which he believed was not in the Group's interest and amounted to asset stripping.
The identity of the buyer and their relationship with leading shareholders needs to be clarified for the good of the company's reputation and in line with internationally accepted corporate governance practices.
It is strange for a Zimbabwean-based group to be selling hard currency generating assets such as the Cape Grace Hotel especially ahead of the 2010 World Cup. Considering that the 2010 World Cup is just around the corner and Cape Grace Hotel is expected to make windfall profits, the Group CEO appears justified in his opposition to this ill-timed disposal of such a critical asset.
Given the information gaps it seems KMAL will be forced to disclose more information why they want to fire the Group CEO who is highly respected in Zimbabwean financial markets and is an inspiration to young professionals seeking to set up their own ventures.
It's hardly credible that a Group would want to fire a founding partner just because there is poor communication within the board, so the market is awash with rumours as to the true nature of the problem, but there is general consensus of asset stripping and possibly racism being among the problems.
KMAL tried to re-assure the market by saying the resolutions being sought are not in any way going to endanger the merger that brought together Kingdom, Meikles and Tanganda. The market seems taken by surprise that there is a direct move to fire the Group CEO which is an extreme measure.
Normally, when there are serious disagreements with a key partner who is also a material shareholder, the issue can be resolved by either re-assigning the key partner or possibly making him a non-executive director.
This allows an orderly succession and protects the Company's reputation. The way this has been handled somehow will endanger the Company's reputation for some time to come and will make its road to Wall Street listing bumpy.
The resolutions are for the removal of Chanakira, Chidembo and Jokonya "to be removed as directors of the company, with immediate effect". Resolution 5 covers the appointment of Marilyn Hugill, Moxon's sister, as a director, while resolutions 6-9 propose the appointment of four South African-based directors.
The other directors to be appointed are Ashwin Mancha, Jack Mitchell, Fiona Silcock, and Carl Stein.
Of the directors appointed following the December 11 vote in favour of the merger between Meikles Africa and Kingdom, only former Kingdom chairperson Busi Bango will remain. No resolution has been filed to remove Econet CEO Douglas Mboweni, who replaced Tawanda Nyambirai earlier this year. This appears a well calculated move to drive a wedge between shareholders representing Econet and those representing the former Kingdom.
The replacement of the three directors at this stage appears not so well-thought out given the government of Zimbabwe's well stated views about foreign control of what they term sensitive assets such as banks and other financial institutions. This move will not escape racial scrutiny given that its five South African directors replacing three Zimbabweans on the board of a Zimbabwean domiciled company are white.
A conglomerate format is not the in-thing in many leading markets.
This format has been left to private equity funds. The widespread trend is to build solid and sector-focused businesses.
There are fears, therefore, that Meikles may be going the wrong direction. It maybe time to visit the prenuptial agreements and see if the group cannot be broken down to its pre-merger entities.
The merger deal is a victim of the proposed power sharing government since Meikles feel the 51 percent local ownership rule may not apply.
The signing of the GNU agreement changed sentiment and brought about a feeling that some of the recent radical proposed and passed legislation on indigenous ownership may not be applied once the new inclusive government takes office. This remains to be seen.
Troubles come with territory. Boardroom wrangles and wars are normal and not for the faint hearted. Meikles was tapping into political capital and young dynamic management in Kingdom. This is like new money meets old money, Chrysler meets Daimler AG, and AOL meets Time Warner. The markets are awash with such deals gone sour.


Source: Allafrica