IHS Towers, Wendel SE and MTN: Before heating up corporate governance tussle
In 2009 when Cristiano Ronaldo was about to move to Real Madrid from Manchester United, the world-record signing was almost botched because the club’s new president at the time, Florentino Perez, never wanted Ronaldo at the club even when all the legal procedures for the deal had been concluded. He reluctantly agreed and Ronaldo’s nine seasons at Madrid were a spell full of records – 451 goals (50 per season), four Champions League titles, three Club World Cups and UEFA Super Cups, two La Liga titles, a pair of Copas del Rey and two Spanish Super Cups for Madrid. Four Ballons d’Or, three Golden Shoe awards, and UEFA Best Player in Europe three times, among others. The move almost didn’t happen because of Perez’s personal interest and ego but he made the world believe it was in the interest of the club. He was more concerned about his predecessor, who initiated the move, taking credit for Ronaldo’s success at the club.
What’s sports got to do with telecom business? You may be wondering, but it appears we are experiencing a similar scenario with IHS Towers, Wendel SE and MTN Group.
A report in Business Day newspaper on June 10, 2023, and some other national dailies suggested a looming corporate governance tussle between IHS Towers on one side and MTN Group and Wendel SE on the other hand.
At the root of this tussle is MTN and Wendel’s request for greater representation on the IHS board, but the request was shut down and not presented for voting by IHS at its annual general meeting on Wednesday, June 7, 2023, many newspaper reports said.
IHS Towers is one of Africa’s leading telecommunication infrastructure providers and MTN Group and Wendel SE, an investment company, are two of its largest shareholders.
MTN Group owns a 26% stake in IHS, while Wendel SE holds 19%, together they hold a 45% stake in IHS. Other key shareholders include; Emerging Capital Partners LLC (11.85%), GIC Pte Ltd. (5.4 %), Issam Darwish (3.5 %), Goldman Sachs International (1.3%) William S. Saad (0.95%) Goldman Sachs & Co. LLC (0.9%) Mohamad Darwish (0.5%) and Bashir Ahmad El-Rufai (0.3%).
The proposal submitted by MTN and Wendel sought to allow shareholders with up to 10% stakes to nominate board members. However, the IHS board disagreed, claiming that the proposal was not in the best interest of the company. In the same way Perez may have argued that Ronaldo’s proposed move in 2009 was not in the interest of Madrid until he was proved wrong.
As principal shareholders with over 10% of the company’s voting shares, having a member sit on the board is the least any investor can ask for.
“MTN has requested the IHS board to call an extraordinary general meeting of the IHS shareholders in order to consider the abovementioned proposal, and any other shareholder proposals relating to governance, to which the group awaits a response. Beyond this, MTN is currently evaluating all its options with the intention of fully enforcing the Shareholders’ Agreement and Articles,” MTN was reported to have said in a statement.
But the IHS board disagreed, claiming that the proposal was not in the best interest of the company.
An IHS spokesperson told Bloomberg: “The proposals requested to be put forward were not in the best interests of the company as a whole or our collective shareholder base.”
The company further said the proposal was “designed to benefit certain large shareholders to the detriment of other shareholders.”
But how much influence would MTN and Wendell wield with their presence on the board?
When one considers that much of what happens in boardrooms takes place behind closed doors and may never become public, it becomes more pertinent to ask why IHS Towers is attempting to shut out its principal shareholders from the boardroom.
Just as seen in the case of Ronaldo’s move to Madrid, analysts posit that MTN and Wendel’s representation on the board is only expected to improve the company’s outlook and position it for more gains. MTN has grown to become Africa’s largest telecom operator with its annual revenue for 2022 rising to $12.689 billion from $12.297 billion in 2021, while Wendel Group’s consolidated net sales totaled €8.7 billion, up +15.9% overall in 2022.
Or is there anything else IHS Towers is not telling us about this refusal? Time will likely reveal.
The investor community is paying close attention and experts say the way this matter unfolds will have significant implications for IHS, its shareholders, and the macro marketplace.
A number of worrisome outcomes could result from this tussle if IHS does not allow reason to prevail. And just as predicted by analysts, we are already seeing the implications.
“Implication might be an erosion of shareholders’ confidence in the company since some of the biggest owners are in conflict with their management,” an analyst recently said. “And as you can see, it’s already reflecting on the share price. I’m seeing the stock already trading at $8.72 right now compared to $17 when it listed.”
In the best interest of all parties, it is important to follow due process and sound corporate governance. “26 percent holding of any firm is substantial enough to deserve a note-worthy position on the board,” another analyst recently argued.
- Michael Orodare, an international multimedia journalist, writes from Scotland, United Kingdom.
