Why Old Mutual’s second largest investor met with it over dispute with former CEO Peter Moyo

By Fifi Peters, CNBC Africa anchor and reporter

As financial services group Old Mutual prepares for another face-off with its former CEO Peter Moyo in court today, its second largest shareholder, Allan Gray, says it has asked the insurer to make contingency plans.

The Cape Town based investment manager, said it had met with Old
Mutual’s board in light of the ongoing litigation between the company and Moyo.

Moyo is seeking reinstatement at the insurer after being
fired in June
and wants Old Mutual’s non-executive directors to be declared
delinquent, whereas Old Mutual wants its dismissal of him to be declared valid.

“The board must make contingency plans,” said Allan Gray
Portfolio Manager, Jacques Plaut

“It must have a plan for various different future scenarios,”
added Plaut, without divulging specific details.

Allan Gray, one of SA’s largest asset managers, owns 9.8% of Old
Mutual.

The shares, managed on behalf of its clients that range from
high-net worth individuals to working class South Africans, are mainly held in
Allan Gray’s Equity,
Balanced and Tax Free Savings Funds.

Old Mutual’s
largest shareholder, the Public Investment Corporation did not respond to
emailed questions about its engagements with the company at the time of writing.

The PIC holds a
10.8% stake in the financial services group, according Old Mutual’s 2018 annual
report.

The dispute has
coincided with an 18% decline in Old Mutual’s share price on the JSE since May
24 when Moyo
was first suspended by the board
for a breakdown in trust and confidence.

But Allan Gray said
it was not clear that significant value had been destroyed by the boardroom
tussle.

“We aren’t sure whether much value has in fact been destroyed.
The share price has fallen a lot, but the market may be overreacting,” said
Plaut

Other factors that
could have weighed on the share price includes soured sentiment towards SA
stocks amid slow economic growth and downgrade fears, heighted global
uncertainty from the US-China trade war as well as the ongoing litigation
between the company’s board and its former CEO.

Old Mutual lost
the first round in court
against its axed CEO, Moyo on July 30, when the
South Gauteng Court in Johannesburg found SA’s largest insurer unlawfully fired
its former boss and ordered for his immediate reinstatement.

The company, however, barred the former CEO from resuming his
duties the next day (July 31) on its belief that the decision to appeal Judge
Brian Mashile’s ruling, nullified the order which also interdicted Old Mutual
from finding a permanent new CEO.

The same court and
judge that heard the original case will also hear today’s arguments.

Old Mutual’s board
has said the loss of trust and confidence in the former CEO that ultimately
resulted in his firing was due to his mishandling of a conflict of interest in
his private company NMT Capital, in which Old Mutual owns a 20% stake.

Moyo says the
conflict of interest is a “manufactured smokescreen”.

He claims he is being
victimised for blowing the whistle on the board chair, Trevor Manuel’s alleged
triple conflict of interest in overseeing the managed separation of
the SA business from its UK operations as a director of Old Mutual Ltd, Old Mutual PLC and Rothschild, one
of the advisers during the separation.

Manuel also sits on
Allan Gray Orbis
Foundation Endowment board. Allan Gray said this did not present a conflict of
interest on its part.

“This endowment was formed by a donation from Mr Allan Gray. The
Endowment supports various education and job creation initiatives in South
Africa. The Endowment is totally separate from the Allan Gray Limited operating
entity so Allan Gray Ltd is not conflicted,” said Plaut.