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Old Mutual’s bitter feud with its fired CEO splits shareholders

All Weather Capital is up for a settlement if it will end the feud, while Allan Gray is against the idea.

Old Mutual shareholders are split on whether the South African insurer should pony up and settle with chief executive officer Peter Moyo or run the risk of a R250 million damages claim.

All Weather Capital is up for a settlement if it will end the feud. Allan Gray, Old Mutual’s second-biggest investor, is against the idea. Sanlam Investment Management wants to wait and see how the court process unfolds, while Prudential Investment Managers reckons a payout of that magnitude would be “egregious.”

Moyo fired the salvo when he issued Old Mutual with a summons seeking damages if he can’t get his job back. The 174-year-old firm shot back, saying it will vigorously defend any claim, and that it was correct to dismiss the CEO. The battle spilled into the open when Moyo was suspended toward the end of May and then fired three weeks later, which he successfully challenged in court as being unfair.

“We are not opposed to a R250 million settlement if it achieves an expedited closure to this unfortunate and costly dispute,” All Weather Capital chief investment officer Shane Watkins said in response to emailed questions. The board should then independently re-evaluate whether Trevor Manuel should continue as chairman, he said.

Read: Moyo launches R20m damages claim against individual Old Mutual directors

“The board has handled this matter appallingly and changes are necessary and desirable,” Watkins said. All Weather Capital holds about R300 million of shares in Old Mutual.

While Prudential Investment Managers, which owns 4% of Old Mutual, would prefer an out-of-court settlement to a long legal process with “uncertain outcomes,” the price is too high, said the Cape Town-based company’s head of equity Johny Lambridis.

‘Particularly excessive”

“It appears particularly excessive in a society like ours that is plagued with inequality,” he said. It “unfortunately speaks to the fact that executive pay in South Africa and globally has grown to levels dangerously out of kilter with what society seems willing to tolerate and what shareholders are willing to pay.”

The amount Moyo is seeking is in addition to the R36 million he earned in salary and incentives in 2018, and R4 million for his six months notice period, the insurer said. In Moyo’s court filings, he is claiming R230 million for Old Mutual allegedly breaching his contract and R20 million for harm to his “dignity, esteem and self worth.” Old Mutual had falsely portrayed him as unethical and dishonest, he said.

Moyo, 57, has denied wrongdoing and said he should’ve been through a disciplinary process before being dismissed. His contract was due to expire when he turns 61. At present Moyo and Old Mutual are not negotiating a settlement or payout, the fired CEO said.

Allan Gray, which holds 10% of Old Mutual and has consulted with the company, is fully behind the board.

“We believe company boards, as shareholder representatives, should be able to dismiss executive officers and there should be no need for cash settlements,” said portfolio manager Jacques Plaut. “The board is following the correct course of action.”

Patrice Rassou, head of equities at Sanlam Investment Management, said Old Mutual’s reasons for dismissing Moyo have not yet been tested in court, making for a difficult call on whether the parties should settle.

While the matter has been handled very poorly, “I don’t think we have a full picture,” he said.

‘Massive headache’

Old Mutual’s board fired Moyo for an alleged conflict of interest over NMT Capital, in which he and Old Mutual both own 20%. Old Mutual said it should’ve been paid preference-share dividends before NMT declared ordinary dividends to its shareholders. Those payouts also caused a fallout with the Industrial Development Corp., which wrote off a portion of a loan to a unit owned by NMT without knowing of a windfall NMT had made from another investment.

The spat — which has seen Moyo been turned away from reporting for work three times — has pitted the fired CEO against his chairman amid allegations and counter-accusations of conflicts of interests, claims they both deny.

Manuel, a former South African finance minister who oversaw the country’s longest stretch of economic growth, has said court rulings against the company has created a “massive headache for corporate governance.” Moyo, who has accused Manuel of spearheading his dismissal, wants to defend his reputation.

Read: Manuel: Moyo can come for coffee, but not to work

Public Investment Corporation continues “to engage both parties to register its concerns and urging them to find a solution to this dispute,” the insurer’s biggest investor and the continent’s largest money manager said in an email.

Old Mutual’s share price is underperforming peers since Moyo dispute erupted
“A delay in resolving this dispute will escalate the destruction of shareholder value,” PIC said. “Most importantly, the PIC urges the Old Mutual Board to act in the best interest of the company and its stakeholders; and to preserve the remaining shareholder value.”

© 2019 Bloomberg L.P.

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This is the outcome of hiring on politics and not merit.

Absolutely. Neither Mr Moyo or Mr Manuel appear suitable for their roles. Time for both to go to the farm or beach house.

I think both parties a cratering the OM brand. This has gone beyond the point of not return. At the AGM, shareholders should use their rights and vote to replace both parties. We cant have petty politics break a good brand. If I was a shareholder I would red card both parties out the door. Better to have a new Chairman and CEO than this toxic mess.

Lionel Messi gets paid a ton of money(He can kick a ball) Bill Gates(No Explanation needed) What is so special about Mr Moyo to earn that amount?

Peter started thinking about those legal fees, but what he is asking is crazy excessive

OM took Moyo to court over the wrong issue. They should have taken Moyo to court on the issue that Moyo paid himself an NMT dividend instead of paying OM the pref dividend, as by agreement.

Instead OM sued him in his capacity as CEO, with scant grounds to do so.

Both Manual and Moyo have shown they are not fit for their positions.

Anyway, why should Moyo be paid R250m for not working? Who at OM was responsible for that agreement?

As long as Moyo has money his lawyers will support him if his funds dry up his lawyers will boot him out the back door and he will definitely not work in this “town” again. So Old Mutual keep your stance because your financial position is definitely more liquid than his.

I doubt you know exactly what you talking about. This case is not about who’s got what.

Quite astounding that a supposedly reasonable person would use their personal opinions as a sound reason on whether what Moyo claims is excessive or not.

I don’t think Peter is worried about fees, he has very good sources of income. Don’t under estimate a man fighting out of principle, and don’t pile up with insults like ‘he can come to have coffee in the foyer’, ‘he is Zimbabwean, or whatever else.

Old Mutual was extended an olive branch, they better grab it and run. The courts continue to view Peter as the de-facto and de-jure CEO, and for that he is going to be paid, whether it is as soon as the Board elect to settle this or when the court processes come to their natural end. Peter will be paid for service rendered or refused (but contracted to).

They need to stop joking, and they will find that R250m was chump change.

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