Caxton says it is considering legal action against the board of Mpact for CEO Bruce Strong’s comments on Caxton’s vote on the pay of nonexecutive directors at Mpact’s AGM in June.
At the AGM on June 2, only 62.6% of the votes were for the resolution, falling short of the required 75%, but the nonexecutive directors agreed to stay on without being paid.
During the interim results presentation of the paper-and-plastics packaging business and recycler on Wednesday, Strong said board members spoke to Caxton since the AGM.
“Unfortunately, up until now we’ve been unable to find common ground as it’s clear that their conduct is underpinned by a different motive, leaving us in a rather invidious position when it comes to the NED (nonexecutive directors) fees.” Strong said they are getting advice on their legal options.
On Friday, Caxton hit back at Mpact in a statement that said the implications of Strong’s comments are “clear”.
“According to Mr Strong, Caxton is acting improperly and contrary to the interests of Mpact for its own ulterior purposes,” said nonexecutive chair Paul Jenkins.
According to Caxton, Mpact’s largest shareholder with a 34% stake, its desire to acquire control of Mpact was met with “inexplicable hostility” from Mpact and Golden Era, Mpact’s competitor. Caxton said it informed Mpact that it voted against the pay of nonexecutive directors, because it believes Mpact’s board failed in its fiduciary duties by not disclosing “adequate details” of the pending cartel case to shareholders.
Financial Mail reported in June that the Competition Commission in 2016 started investigating Mpact for taking control of several entities without the necessary approval from the commission. In 2020, it fined Mpact R7m, but during its investigation the commission found that Mpact and other smaller entities were involved in collusive conduct relating to price fixing, collusive tendering and division of markets.
In April 2019 the commission referred Mpact and New Era Packaging, a subsidiary of Golden Era, to the tribunal for prosecution for cartel conduct, accusing the companies of fixing prices, dividing markets by allocating customers and tendering collusively in the market for the manufacture and supply of corrugated packaging paper products.
“That this cartel has endured for about 40 years means the prices of so many products may have been inflated as a result,” said commissioner Tembinkosi Bonakele.
The Competition Commission asked the Competition Tribunal to impose on New Era a penalty equivalent to 10% of its annual turnover, but made no mention of a penalty for Mpact. Three years later, the case has not been heard by the tribunal and it has been postponed indefinitely.
Caxton alleged Mpact is soliciting support from Golden Era to oppose its merger and that it filed “secret representations” and affidavits with competition authorities, worsening Caxton’s concern that Mpact and Golden Era “remain involved in the vestiges of their long-standing cartel”.
Caxton said on Friday that the Competition Tribunal recently disclosed Mpact’s “secret information” on a restricted basis to the chair of Caxton “who now considers that the Mpact board has also failed in its duty to disclose material price sensitive information to all Mpact shareholders including Caxton”.
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