The decision by three top directors at Huge Group, including its chairman, Duarte da Silva, to resign from the board on Friday came as a “complete surprise and shock to the rest of us”, said CEO James Herbst.
Herbst was responding on Saturday to a query about what transpired at a board meeting on Friday to cause Da Silva and fellow directors Brian Armstrong and Craig Lyons – all three highly respected businessmen in South Africa – to resign with immediate effect.
News of the boardroom ructions first emerged after markets closed on Friday, when Huge Group, in a statement to investors, announced the resignations of the three directors.
Asked for comment on the developments, Da Silva told TechCentral in a text message on Friday evening: “Our reasons were clearly set out in our letter of resignation. If you want more detail, you can ask the company directly. We no longer felt we could serve the company.”
Armstrong, who is a former group chief operating officer at Telkom, had a similar response, texting: “I and my fellow directors made the reasons for our departure very clear to the company and I think it’s best you engage with them for more detail.”
TechCentral was not able to reach Lyons for comment.
Asked what transpired at the board meeting, and why the directors quit, Herbst said via text message that there were two groupings in Huge Group who held different views about corporate strategy.
“A company has many stakeholders, and they often have different views, but in most cases these different stakeholders either find common ground or agree to disagree,” said Herbst in the text message.
‘Surprise and shock’
“In this instance, the role players included a body of shareholders holding more than 50% of the voting rights of the company, the CEO and certain non-executive directors – including the chairman of the audit committee (Dennis Gammie) – as a group of stakeholders on the one hand; and the three non-executive directors who resigned as a group of stakeholders on the other hand. These two groups of role players didn’t share the same views.
“We had a board meeting yesterday, which lasted just short of three hours, where lots of views were shared in a cordial and constructive manner. At no time did we have any idea that all three gentlemen would, right at the very end of the meeting, collectively tender their resignations. These decisions came as a complete surprise and shock to the rest of us,” Herbst said.
Speaking to TechCentral on the phone on Saturday, Herbst said one group of shareholders, who were in the minority, felt Huge should have stuck to its 2017 strategy of organic growth with bolt-on acquisitions.
“The vast majority of shareholders believed we needed to move the portfolio to software and digital assets … and to be bold in our M&A strategy. So, there were two bodies of shareholders wanting different things.”
These differences in views extended to the boardroom, too, Herbst said.
In 2021, the board approved the more aggressive approach to M&A – aimed at pivoting the business to become more of a player in software and digital services. This is what prompted the (failed) pursuit of JSE-listed software services group Adapt IT.
In his text message, Herbst said: “It is a pity that the three directors who resigned felt they didn’t have the resolve to stay and fight for their views. Be that as it may, all three gentlemen made a significant contribution to the company for which the company is very grateful.
“Their sudden collective departure is a loss that the company will have to bear – the loss is the institutional knowledge they possessed. The company is sorry to see them all resign all at once and with immediate effect. We believe that they still had, despite their different views, a significant contribution to make. They are all captains in business and they will be missed.
“Personally, Duarte is my friend. We walked a wonderful road together and had so much fun. I will miss his involvement. We have had days, if not weeks, of intellectually stimulating conversation, filled with lots of laughter.”
Read: Boardroom drama at Huge Group as top directors quit
Praesidium Capital Management founder Mike Beamish was appointed to the board at Friday’s meeting, as a non-executive. Praesidium is Huge Group’s largest single shareholder. Former Vodacom and Nedbank executive Veran Kathan was also appointed to the board, as an independent non-executive, and was named chairman after Da Silva’s decision to resign.
“We hope that the resignations don’t overshadow the shareholders’ desire to appoint very strong and experienced directors in Veran Kathan and Mike Beamish. Mike represents a large body of shareholders who have supported Huge Group from listing,” Herbst said in his text message.
Zak van de Merwe, a former CEO of Virgin Mobile South Africa – who joined Huge Group through a recent acquisition – was appointed as an executive director at the meeting.
“Andy Openshaw, the chief operating officer, and I are thrilled to see Zak van de Merwe join our ranks as an executive. In the last nine months, he has brought significant commercial capacity to Huge Group. Yesterday was meant to be a celebration of his appointment,” he added. – © 2022 NewsCentral Media