Group Five in Talks With Private Equity, Ex-Chairman Says

JOHANNESBURG (Capital Markets in Africa) – Group Five Ltd. has received expressions of interest in the South African construction company from private equity firms and is still talking to one of them, according to outgoing Chairman Philisiwe Mthethwa.

“That discussion with the private equity fund is ongoing,” she said by phone on Tuesday, declining to name the suitor because the talks are confidential. The Johannesburg-based company hasn’t received a “bona fide offer” and hasn’t rejected any approaches, she said.

Mthethwa was responding to comments by Andrew Lapping, chief investment officer of its biggest shareholder, Allan Gray Ltd., who said he had been told by the Group Five board that an approach had been made by Ethos Private Equity that hadn’t been put to shareholders. That hardened his conviction that a change of leadership was required, he said by phone Monday. Investors voted in eight new non-executive directors at a meeting called by the Cape Town-based money manager on the same day, after which Mthethwa stepped down.

Ethos didn’t immediately respond to a request for comment.

Group Five’s board opposed Allan Gray’s nomination of ex-CEO Mike Upton, arguing that the he’s tainted by allegations of collusion against the industry over contracts to build stadiums for the 2010 soccer World Cup. Just over 61 percent of investors voted in favor of Upton’s appointment, the second-worst result of the eight nominees, Group Five said in a statement.

Group Five shares traded 10 percent lower at 17.10 rand as of 4:47 p.m. in Johannesburg on Tuesday, the lowest in more than two months. The stock has more than halved in the past three years as sluggish economic growth in South Africa led to a slowdown in infrastructure and construction projects.

The unprofitable company appointed Themba Mosai as interim CEO after Eric Vemer’s resignation earlier this year and confirmed him in the post in May. The company has also announced a reorganization that will lead to job cuts.

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