Dominic Sewela has stirred the pot of corporate governance with his proposed R23bn buyout of Barloworld. The bid by a consortium — featuring none other than Barloworld CEO, Sewela — has unsurprisingly raised more than a few eyebrows and a plethora of awkward questions about conflict of interest.
Let’s get to the heart of the issue: Sewela’s dual role as CEO of Barloworld and a key figure in the consortium seeking to buy the company. If this doesn’t scream “conflict of interest”, then perhaps we need to redefine the term. The situation is eerily reminiscent of other high-profile corporate escapades, such as Michael Dell’s buyout of Dell Inc, where the line between corporate duty and personal gain was blurred beyond recognition.
Sure, the independent board has valiantly set up governance protocols to manage this delicate situation. These include nondisclosure agreements, a conduct protocol for Sewela, and a steering committee composed of the unconflicted executives and external advisers.
And yes, Sewela, alongside Saudi Arabia’s Gulf Falcon Holdings, a parent company which owns 19% of Barloworld, has offered a generous premium for shareholders. At R123 per share, including the recent dividend payout, it is a hefty 87% higher, based on the stock average value, adjusted for trading volumes, before the buyout talks went public in April this year.
Still, Sewela’s dual role creates an inherent bias that no amount of governance can fully mitigate. To begin with, Barloworld’s stock market performance since he took over in 2017 has been far from impressive. Shareholder equity peaked at nearly R150 in 2018 but has since dropped to about R110 — exhibit A in how Sewela has presided over the destruction of shareholder value. Of course, external factors play a role, but Sewela cannot escape valid questions about the integrity of the information spigot, which highly influences the share price and over which, as CEO, he holds significant control.
To further complicate matters, the valuation multiple paints a less-than-flattering picture. Sewela and the Saudis would snatch Barloworld at about 4.3 times its ebitda, almost half the sector's average — a glaring discrepancy that suggests that Barloworld is undervalued relative to its peers and further fuelling suspicions about fairness and adding spice to the already heady mix of discontent.
The offer has already faced stiff resistance from key shareholders, most notably Silchester International Investors, which say it undervalues their equity. Silchester would not sell for anything less than R130 per share — underscoring a broader concern: does the offer truly reflect Barloworld's value?
The Barloworld buyout raises more questions than it answers. Will the governance protocols be enough to ensure a fair deal for all shareholders? And most importantly, as both referee and player, can Sewela blow the whistle on his own potential fouls and keep the game fair for everyone? As the drama unfolds, one thing is clear: the saga is a masterclass in corporate conflict of interest, and we will be watching closely.
• Motsoeneng is Business Day acting editor
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