Harare - Recent developments at Meikles have brought to the fore again the corporate governance concerns which have been raised since a decade ago. Meikles is a listed diversified conglomerate with businesses in agriculture through Tanganda, Hospitality through Meikles Hotels operating Meikles hotel, Victoria Falls and a shareholding in an SA company controlling Cape Grace Hotel, retail through a 51% controlling stake in TM Pick n Pay, a financial services business among other minor operations. The prime asset within the group is its retail operations which was given a new breath of life when the company partnered regional retail giant Pick n Pay SA which is listed on the JSE and has operations in the region.

Of particular interest in the Meikles story is how the group is structured and controlled and the impact this has had on investor perception, balance sheet position and financial performance. Despite 51% of its shareholding being held by the public via the stock market, Meikles is tightly controlled by the Moxon family, a third generation benefactor through maternal relationship to the Meikles family, the original owners of the symbolic company. At the helm of the group is John Moxon who is the executive chairman a position he has largely occupied for 35 years that is since 1983.

Moxon has largely used his 48 years period at the company to consolidate his position and interests which he has largely achieved as can be seen through a sustained period at the helm of the company and consolidation of executive powers while at the same time controlling the board, not to say the feature is not allowable for listed companies. On the other hand Moxon has upped his family’s stake over the years through various investment vehicles now consolidated under Gondor Capital and until the recent court case, controlled 49% of the company.

These untamed powers have allowed Moxon to structure management of the company in his desired way without any much oversight, a clear source of corporate governance challenges which the company has grappled with over the last decade. Meikles’ main board is composed of a record 4 directors only and these include Moxon who is the executive chairman. Of the other 3 only 1, Chidembo, is independent. The way the board is constituted sufficiently demonstrates that it is designed to give Moxon a free passage on any of his desired dealings with the company’s resources, unhindered.

In the famous Kingdom Meikles Africa fallout in 2008 some important developments were noted which demonstrates the importance of board independence in ensuring acceptable corporate governance standards. It was reported that when Moxon introduced a matter to the board regarding the disposal of Cape Grace Hotel in South Africa to another company called Mentor Holdings, concerns were raised by 2 of the board members, one being Tawanda Nyambirai, then Econet Chairman (11% shareholder) and Chidembo, the only independent director on the board. The 2 insisted on an independent valuation of the assets before disposal to ascertain fair value, since there were indication of a higher bid.

Moxon and his proxies on the board went on to sign the resolution without the consent of the 2 resulting in a protracted fight which dented the company’s share price on the ZSE. After the deconsolidation of Kingdom Meikles Africa, Moxon reverted to his position as the Executive Chairman, taking over day to day management of Meikles while returning board control. Further consolidation of shareholding through combining various investment vehicles into 1 vehicles, was initiated. This particular investment has remained a bone of contention at every turn due to underperformance, lack of transparency and irrecoverability of some of the funds.

In recent years, matters regards a debt due from RBZ and its valuation has taken centre stage and some minorities have voiced concerns over the matter accusing Moxon of overstating the debt which had an impact of overvaluing the company’s assets, perceived value and profits in at least 2 financial years. The matter with the RBZ remains contentious and largely outstanding to date. This particular debt issue has birthed yet another controversy and corporate governance concerns. A third party contracted to negotiate the debt recovery deal with RBZ took Meikles to court, on the basis of claiming outstanding service payments with interest amounting to $2.7 million and this has resulted in a loss of value for shareholders. The aggrieved party won the case against Meikles and was granted leave dispose of Meikles share in subsidiary units, as a form of compensation.

The way Meikles negotiated the deal in respect of settling the outstanding payment was grossly bad, devoid of other shareholders consideration and clearly mafia-like, the details are there for all to see. The way Moxon acted through dodging liason efforts, as per agreement, shows he did not care for the consequences, or maybe he designed the outcome, to strip minors of value. In the interest of the minorities across the ZSE and precedence purposes, such decadencies in corporate governance cannot be allowed to go on.

The missing details in the debacle is that Lynton Edwards a local stockbroker “the new shareholder” who bought the Meikles shareholders at a song through the auction, is closely related to Moxon.  It may be very normal to imply that Moxon actually bought the shares lower, through Lynton. All these issues highlight an ad hoc care free approach in management of Meikles affairs where one man clearly has no restraint. The company has not been so much of a good performer both in financial and stock market performances over the past couple of year. Since the demerger with Kingdom in 2009 the company has reported a profit in only 3 of the 9 year to date and in all the 9 years working capital was in sharp deficit. Another indication of how investors perceive the company, its market value is only a third of its net asset, against a present market average of 70%.

-Equity Axis Research