Ketso Gordhan: PPC’s wanna-be-back CEO is supported where it matters

The non-executive directors at cement manufacturing group PPC are about to taste some of their own medicine. The board of technically qualified but business-experience-challenged directors chose to back Financial Director Tryphosa Ramano rather than since departed CEO Ketso Gordhan. Refusing to give up without a fight, Gordhan has spent the past few weeks approaching PPC’s shareholders, three of whom – Foord, Visio and Old Mutual – have requisitioned a Special General Meeting to be held in the first half of December. These shareholders intend proposing and voting for an alternative board of directors. If successful, it will reinstate Gordhan, who visited the CNBC Africa Power Lunch studio today to update us on the latest developments in this fascinating saga.Ā – AH

ALEC HOGG:Ā PPC is to hold a special meeting, we think next month, after three shareholders who reportedly own more than ten percent of the shares, have requisitioned the meeting. Joining us now, in the studio to give us an update is the former Chief Executive of PPC, Ketso Gordhan. Ketso, we havenā€™t seen you for a little while. The last time you were here, you said you would be talking to shareholders. You hoped that shareholders would support you in your view, as against the view of the Board of Directors of PPC. It appears that youā€™ve done quite a lot of work in that time.

KETSO GORDHAN: I think the important point I made the last time is that shareholders, who are the owners of the business, need to understand whatā€™s happening in the business and then take a view on what they think they should do. Foord Asset Management made an interesting statement (republished at bottom of this transcript). They said that they could have just left it, sold their position, or walked away from it, but theyā€™ve decided that they will actually take some action, in the best interest of all shareholders.

Asset manager Dave Foord: Supporting Ketso Gordhan in his fight with PPC directorate
Asset manager Dave Foord: Supporting Ketso Gordhan in his battle against the PPC directorate

ALEC HOGG: But Dave Foord is not the kind of guy to walk away. He just isnā€™t. Heā€™s more of a, well as you know, heā€™s eccentric. Heā€™s different, and heā€™s an incredible entrepreneur and businessman and, possibly to you, a bit of a kindred spirit.

KETSO GORDHAN: Yes, I think both of usā€¦ I only met him once, but I would definitely be able to say that heā€™s a very principled guy, like me, and for similar reasons neither of us could walk away from this thing. Ultimately, I think thereā€™s a huge amount of shareholder value that is within the PPC structure and weā€™ve got to organise it in such a way that we can unleash its full potential. Iā€™ve been on record as saying that I think the business can double its size and this little interruption is not a good thing for the business. I think itā€™s bad for the image of the business, itā€™s bad for the shareholders, itā€™s bad for the staff, and itā€™s bad for our foreign partners.

ALEC HOGG: Whatā€™s the bottom line here though? How many asset managers did you see – how many accepted or who are supporting you and what votes are you likely to have at the special, general meeting?

KETSO GORDHAN: I think that because of the number of constraints that asset managers have, in not being, construed as concept parties. They can never really tell you exactly what theyā€™re thinking, and I respect that. From a governance point of view, I respect that and I think that the parties that have come forward, the ten percent, to ask for the meeting. Firstly, they have a right to do that. Secondly, in my view, in this kind of circumstance they almost have an obligation to do it, so Iā€™m very pleased that theyā€™ve done it and, clearly, Iā€™m a big supporter of what theyā€™ve done and I want to congratulate them for taking the initiative. My gut feeling, Iā€™ve talked to most of the institutional shareholders, both in South Africa and outside of South Africa, and my gut feeling is that many of them have understood that the company needs a new board and a new direction.

GUGULETHU MFUPHI: Thatā€™s your objective for the meeting. If things donā€™t work out that way, whatā€™s the alternative?

KETSO GORDHAN: I think the alternatives are going to be determined by shareholders and the market. I think that in the current environment, PPC would make a very good target, for somebody that wants to acquire a business with lots of upside. That is not been recognised and fully extracted at the moment.

PPC's share price has dropped sharply since Ketso Gordhan's departure
PPC’s share price has dropped sharply since Ketso Gordhan’s departure

ALEC HOGG: Thatā€™s plan B. Are you talking to anybody on that?

KETSO GORDHAN: No, Iā€™m not. Iā€™m just saying that that is clearly…

ALEC HOGG: So it is not your plan B?

KETSO GORDHAN: Definitely not, I have a plan A, which is to help to get the company back on track and recognise its full potential. I think itā€™s a great company and I think that both the things that I had started there (1) the expansion into the rest of the Continent and (2) an experiment in trying to create what I consider a ā€˜model South African corporateā€™. You reduce the wage gap. You put equity in the hands of workers. Resolve their housing situations, so that they have an asset to pass onto the next generation. Thatā€™s the cool stuff, so if you ask me, under the right circumstances, would I go back? Yes, but the reason is those two things because…

ALEC HOGG: Are you on the list of Proposed New Directors?

KETSO GORDHAN: Yes, I am.

ALEC HOGG: Just unpack how this whole thing works because I think a little earlier Jan van Niekerk was saying that it is interesting now, with the HCI story and, clearly with the PPC story. That the rest of us are getting a very interesting look inside what happens in a business, and it can get quite messy. What happens from here?

KETSO GORDHAN: From a formal process point of view, a shareholder meeting will have to be called. The company says it will call it early in December. The MOI of the company says ā€˜within 15 working daysā€™.

ALEC HOGG: The MOI?

KETSO GORDHAN: The Memorandum of Incorporation. It says ā€˜15 working daysā€™ so it is roughly in that timeframe. Now at the meeting, you need to have at least 25-percent of the shareholders participate, so thatā€™s almost like the quorum required for the meeting to be held and for the resolution to be passed, you need at least 50 percent plus one of the shareholders voting in support.

ALEC HOGG: So you have, at the moment at least ten-percent but we do know, camped against you is the Public Investment Commissioners, who have also got just over ten-percent, or so they said.

KETSO GORDHAN:Ā I wouldnā€™t put them in any box at the moment. I think thereā€™s a debate going on about how they will respond to this situation. I also think that they need to be very mindful that they have a fairly large conflict. The PIC owns a controlling share of Afrisam, when the Competition Commission approved that deal they also said ā€˜you should have Chinese walls and not have a representative or influence whatā€™s happening in PPCā€™. From a governance point of view, I think the debate is still on about what the PIC will do.

ALEC HOGG: So suspicious people like us could be saying ā€˜hang on, the PIC wonā€™t want you back because it will be more competitive, so it will benefit Afrisam if you donā€™t comeā€™, for instance, so they need to be careful about that conflict.

KETSO GORDHAN: Yes, but I also think that thereā€™s just a general discussion still going on within the PIC. Iā€™ve talked to them and I donā€™t think that their minds have been made up and I hope they do the right thing, for shareholders in the business.

GUGULETHU MFUPHI: You also referred to the situation as a bit of an interruption. Have you received any feedback from some of your staff and your stakeholders, about the morale?

KETSO GORDHAN: Yes, I think morale is generally very low, within the business.

The staff signed a petition saying they wanted me back.

I expect that their six percent will count in my favour, at the time of the Special Shareholder Meeting. Individual workers will have a right to say what they think, which I think is fantastic.

GUGULETHU MFUPHI: Is that a first? Is that part of the norm, in South Africa?

KETSO GORDHAN: Itā€™s part of the norm, depending on how the BEE employee deal is structured, so it is the norm in, certainly, in PPC.

ALEC HOGG: How many staff, when you say the ā€˜staff voted in your favourā€™, how many?

KETSO GORDHAN: Weā€™re talking of more than 1000 of the workers, of the, roughly, 2000 who signed the petition, so itā€™s a significant number. The interruption also has impacted senior management in the business. The departure of Richard Tomes, whoā€™s the Head of the sales and marketing part of the South African business, and I think that was a big knock to the business.

ALEC HOGG: Would you bring him back?

KETSO GORDHAN: I would love to. I think heā€™s a special guy. He has an incredible track record. Heā€™s been in the business for 15 years. Customers love him and we love him, so absolutely, I would love to bring him back.

ALEC HOGG: When we asked you last time about the Tryphosa Ramano relationship. You said ā€˜no commentā€™ and now I interpretā€¦ Itā€™s common knowledge everywhere.

KETSO GORDHAN: Iā€™m going to stick to the ā€˜no commentā€™ because I think the principal issue here is I asked the board to support me, to exit a Senior Executive and they said no. I was within my rights to do that and what they did in preventing me, is inconsistent with their fiduciary responsibility and looking after whatā€™s in the best interests of the shareholders. What I stand up and say today, is that they didnā€™t do whatā€™s right for the business.

ALEC HOGG: YYouā€™re changing a lot here. Youā€™ve changed a lot within PPC…. So often, the people who get appointed to Boards of Directors are Spaniels who wag their tails when the Chief Executive walks in the ring or in the room, rather than the Rottweilerā€™s they should be.

Now, in this case, youā€™ve got Rottweilerā€™s on the other end but maybe Rottweiler are bearing their teeth at the wrong person.

KETSO GORDHAN: I think that what Iā€™ve explained to shareholders is that we are a business that is doing something quite complex, thatā€™s quite risky, and so we need a lot more experienced people with knowledge and know-how. If we had a bunch of people there who understood the industry weā€™re in or operating on the Continent, or understood how to operate within a highly geared business, because that is what PPC is. That set of skills would guide a well-motivated and fully aligned management team, which we have.

ALEC HOGG: And you say the board isnā€™t.

KETSO GORDHAN: Thatā€™s what we donā€™t have, so thatā€™s…

ALEC HOGG: Youā€™ve got a lot of Chartered Accountants on the board.

KETSO GORDHAN: Yes, but if youā€™re a Chartered Accountant who hasnā€™t run a business, I donā€™t think itā€™s the same thing. I think running a business is really the key skill we require.

ALEC HOGG: Okay, so are these the kind of people youā€™d like to put onto the board, if you and the shareholders win?

KETSO GORDHAN: Yes.

GUGULETHU MFUPHI: Have you identified any particular candidates?

KETSO GORDHAN: I think the shareholders have and the way the resolution will be made public, at some point, includes a list of board members or potential board members.

ALEC HOGG: But thatā€™s what I was getting back to as well that you are changing things. So often shareholders, with big chunks of equity just sit back and, if they donā€™t like the way things are going then they sell their shares. In this case, the shareholders are going to be taking a more active interest, which surely is what shareholders should be doing anyway.

KETSO GORDHAN: Thatā€™s what I was saying earlier. For me, Alec, I think this is hopefully, it is a good example, and where shareholder value was being undermined. Shareholders have the right and theyā€™ve exercised it, and hopefully the outcome is a very positive one. If things are normalised at PPC, with a new board and a strong management team, I still believe, as I said the last time that we will double the size of this business.

ALEC HOGG: What about the story that you overstepped your authority, in the Algerian transaction?

KETSO GORDHAN: Yes, Iā€™ve heard the story and let me just say very openly that the Algeria deal is far from done. We were at the point where we just had a Board Mandate, to carry out a feasibility study. We were in the process of carrying out the feasibility study, so if the board is unhappy with any of the elements of that, there is still plenty of time to change it. Everything Iā€™ve done, on the Algeria deal, (before my departure) was done with the full approval of the board.

Ketso Gordhan sees similarities between his situation and what happened to HCI's Marcel Golding.
Ketso Gordhan sees similarities between his situation and what happened to HCI’s Marcel Golding.

ALEC HOGG: So, a bit like Marcel Golding.

KETSO GORDHAN: I think itā€™s a similar kind of thing, in some ways.

ALEC HOGG: Have you followed that that story or that case?

KETSO GORDHAN: I have.

ALEC HOGG: And your reading of itā€¦

KETSO GORDHAN: I think that the event itself is not the important issue. Clearly, there was a bigger difference in opinion and you use whatever is available, at a point in time. I think it is very sad because Johnny and Marcel had worked together for such a long time and created such an incredible outcome. To see it go up in the way that it did was a little bit sad. I think that, for me, the important point; thereā€™s going to be a lot of noise in the system now, as we move towards the Special Meeting. My appeal to everybody is going to be ā€˜letā€™s focus on the future of PPCā€™. ā€˜Letā€™s get the right board in there. Letā€™s get the right management in there and let this business grow in the direction that it has the potential toā€™. Looking behind us doesnā€™t really help the business at all. Itā€™s suffered a lot. Itā€™s lost almost R3bn in value. That is bigger than many companies listed on the Stock Exchange, so itā€™s not a good thing. The foreign partners are a little bit uncertain. The management is uncertain. The staffs are unhappy. We need to bring this thing to a positive close and move forward.

GUGULETHU MFUPHI: Like Marcel if push comes to shove, would you fall on your sword?

KETSO GORDHAN: I already have, so Iā€™m no longer in the business.

ALEC HOGG: A sword through your back.

KETSO GORDHAN: Iā€™m already out of the business but the one thing that I will say publicly, is that I think that with, and even if Iā€™m not the CEO, but the appropriate person there thatā€™s been placed there by the new board. Iā€™m going to hang onto my shares because it is a company with great potential and a great team.FOORD’S POSITION ON PPC

Foord Asset Management is a long-term investor in PPC Limited. We are concerned that the recent conduct and decisions taken by the current PPC board of directors may prejudice the long-term interests of our investors.

In addition, we believe that PPC employees, executives and project partners in Africa are also dissatisfied with the board’s efforts to resolve the company’s leadership impasse. In our view, the current board must be replaced with a functional board without delay. The new board must immediately implement measures to stabilise PPC’s executive team, ensure continuity of its strategy of expansion and restore the confidence of its employees.

The Companies Act of 2008 enables shareholders owning at least 10% of the voting rights of a company to demand that the company convene a special general meeting to consider specified resolutions. Foord, together with other shareholders, has asserted the rights of its investors in terms of this rule and has called on the PPC board to convene a shareholders’ meeting aimed at reconstituting the board of directors.

We believe that it is imperative for all shareholders to be given the opportunity to vote on a resolution to appoint new directors who can guide the company through this strategically important phase of its expansion. To this end, Foord, together with its partners, has collated a list of experienced candidates that it considers would be best suited to this undertaking and will continue to press for the rights of its investors.

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