Institutions to force Johnnic`s hand
September 21, 2004
By Ann Crotty
Johannesburg - Institutional shareholders would soon take steps to force Johnnic, the listed holding company, to dismantle its value-destroying pyramid structure, sources close to the company revealed.
Johnnic holds 62.5 percent of separately listed Johnnic Communications (Johncom) - which owns well-known brands such as Gallo Music, Ster-Kinekor and the Sunday Times - and some property, including Gallagher Estate in Midrand.
The sources said a resolution to force the issue would be tabled at the coming annual meeting.
The unusual decision to table the resolution is expected to be taken by institutional shareholders frustrated by the Johnnic board`s lack of progress in dealing with the complicated issue of the company`s future as a separately listed entity on the JSE Securities Exchange.
Their frustrations have been heightened by reports of steep overhead costs at Johnnic - chief of which are believed to be excessively generous packages for executive directors.
It is unclear whether the concerns about remuneration were instrumental in the recent unexpected departure of Johnnic`s chief operation officer, Jacob Modise, or whether that departure was due to disagreements with other board members about the future strategic direction of Johnnic.
Mashudu Ramano, a Johnnic director, said yesterday a statement on Johnnic`s future would be issued today by him and fellow directors Cyril Ramaphosa and Phuthuma Nhleko.
Shareholders have been told they will have to wait for another week to see details of the executive remuneration packages paid in financial 2004.
Although Johnnic`s fiscal year ends in March and the company has few assets other than its 62.5 percent stake in media group Johncom, the annual report has not yet been released. Johncom`s annual report for financial 2004 was released in July.
In terms of the JSE`s listing rules, Johnnic has until the end of September to release its annual report.
In addition to details about executive remuneration, the 2004 Johnnic annual report will have to provide details about the benefits that members of the share incentive scheme realised as a result of last year`s decision to accelerate that scheme.
The exercise date of the options in the scheme was brought forward after the unbundling of MTN, which was equivalent to about 90 percent of Johnnic`s value.
Analysts said last year this acceleration would have generated millions of rands of profit for executives in the scheme in addition to their remuneration packages.
Meanwhile, news of the plan to table a resolution at the annual meeting comes amid reports that the institutional shareholders have been approached by a number of parties interested in acquiring a controlling stake in Johnnic. Control of Johnnic would ensure control of Johncom.
The major institutional shareholders are Old Mutual Asset Managers, Coronation, Metropolitan, Sanlam and the Public Investment Commissioners.
Peter Vogel of Coronation said yesterday he did not think shareholders would sell at the current share price.
However, shareholder would be waiting to see what the annual report said on the future. .
Johnnic shares closed 20c up at R16.95 yesterday. The media and entertainment sector was 0.06 percent higher.
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