The Mpact-Caxton thaw is happening

Is peace about to break out between Caxton and Mpact? 

At Mpact’s recent AGM, shareholders voted in support of the special resolution needed to pay non-executive directors (NEDs). It was the first time since June 2021’s AGM that the resolution had received the necessary backing.  

This is because since the June 2022 AGM, Caxton has used its 34.8% stake in Mpact to block most of the special resolutions, which require 75% backing from shareholders. 

It may, or may not, have been a coincidence that long-serving chair Tony Phillips announced he was stepping down from the Mpact board just days before this year’s AGM.  

Caxton appears to have tagged Phillips as the primary reason it has not made progress with whatever plans it may have to get control of Mpact. With a 34.8% stake, Caxton is at the edge of the 35% level at which a mandatory offer has to be made to all shareholders. To date, Caxton has refused to make a mandatory offer on the grounds that Mpact has unresolved issues with the competition authorities. Mpact denies any such issues exist. 

With the necessary remuneration resolution in the bag, the board can now dismantle the cumbersome system that has been used to pay the NEDs for the past three years. 

It was an entirely legal – but questionable – move. In 2022, all of Mpact Ltd’s directors were appointed to the board of the company’s wholly owned operating subsidiary, Mpact Operations. Mpact Operations is unlisted and therefore not subject to the prohibition on directors’ fees. So, for the past three years, the NEDs have received fees from Mpact Operations.  

It was an ungainly solution to an unprecedented move by a disgruntled shareholder. Not only was it questionable from a governance perspective, but it also involved duplication of some main board committees and, according to group CEO Bruce Strong, the NEDs only received about 80% of the equivalent main board fees. “The dual structure has been complicated,” Strong told Currency after the recent AGM. “We had to run two board systems and as an unlisted entity Mpact Operations couldn’t pay what a listed entity would pay.” 

Still far from amicable

Strong denies that Phillips’s resignation was the price the board had to pay to secure Caxton’s support for the fee-payment resolution. He said for some time shareholders had expressed concerns about the tenure of directors such as Phillips, who had been appointed when Mpact was listed in 2011. 

During the AGM, the newly appointed chair, Sbu Luthuli, told shareholders that Phillips had indicated he would retire towards the end of calendar 2025 as far back as last year. However, because of the requirement for re-election of directors every three years, if Phillips wanted to stay to the end of 2025 he would first have to be re-elected to the board at the June AGM. 

Phillips’s plan involved the April appointment of Luthuli as lead independent director. On his retirement at year-end, Luthuli would assume the position of chair.  

Luthuli denied Phillips moved earlier than planned because proxy voting ahead of the meeting reflected hefty opposition to his re-election. “Before the AGM and before the votes were finalised, he [Phillips] reflected and felt comfortable he had a succession plan in place and didn’t need to wait,” Luthuli told the meeting. This meant the resolution for the re-election of Phillips was withdrawn just days before the meeting. 

Caxton chair Paul Jenkins told Currency they voted for the NED remuneration because they think “the board is trying hard to get its governance right”. 

While Jenkins thinks relations between the two companies might improve in the wake of Phillips’ departure, he would not indicate what plans Caxton has for its Mpact investment. “We’ve got 34% of a very nice company,” is all he would say. 

Things may improve, but right now they still seem far from amicable. Strong told Currency there had been some “engagement”, but nothing “substantial” has happened. “We’re treating them as shareholders, as far as they’re shareholders, and customers as far as they are customers.” 

The Mpact share price is up 4% since the AGM, narrowing its fall this year to 8.7%. Over the same period Caxton has gained just over 2%, taking its year-to-date performance to a loss of 2.7%.  

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