The board at FoneWorx says it has noted with “considerable surprise” the press release issued by the Kirsh family alleging poor state of corporate governance at the listed telecoms and IT solutions provider.
The family said on Monday (8 April) it would request an extraordinary general meeting (EGM) to remove and replace the non-executive members of the board.
The family says it will look to retain the executive directors at FoneWorx to implement a proposed merger between the two entities.
In December 2012, Value+ Nettwork (V+) – a group founded by William Kirsh – and FoneWorx announced an intention to merge.
Issie and William Kirsh, through their respective family trusts, invested in FoneWorx with the view of merging V+ and FoneWorx for the benefit of shareholders.
The Kirsh family own approximately 75% of V+ and 32.7% of FoneWorx, being the respective companies’ largest shareholders.
The FoneWorx board said that the attack by the Kirsh family “is nothing more than an attempt by the Kirsh family to so reconstitute the board of FoneWorx as to enable them to force through a transaction which would give them access to the significant capital required to pursue a course which the board of FoneWorx perceives as fundamentally flawed”.
FoneWorx stressed that it needed to put the Kirsh family’s statements into perspective.
The group said its board were concerned by the constant changes to Kirsh family owned and controlled business, Opengate´s financial projections and funding requirements and its failure to achieve its current year projected results.
FoneWorx said that following several rounds of negotiations, a further meeting took place which culminated in an agreement that the entire transaction be cancelled by consensual agreement.
“An appropriate cancellation agreement was prepared by the attorneys for the Kirsh family and approved by the company attorneys and the company,” FoneWorx said.
The group pointed out that its first indication that the Kirsh family had again reneged on that agreement was the press release to which it was responding.
No poor state of corporate governance
The FoneWorx board said it categorically denies that there is a “poor state of corporate governance” at the company and reminded Kirsh that he has said on many public platforms that the company is well-run.
“It is also most surprising that at no stage during our engagement, and the due diligence on FoneWorx by Value+ did the Kirsh family or their advisors raise any issues regarding the corporate governance of the company or its lack of strategy.”
“The latest observations can therefore only be seen as opportunistic and in bad taste,” FoneWorx said.
The board also defended its “sound” financial strategy which it said has resulted in solid compound growths on many key dials and the aggregation of close to R100 million in cash.
The company added that it has also paid good dividends over the past four years. In addition, each operating division has defined strategies which have shown positive growth.
“We remind the Kirsh family that FoneWorx has achieved a five year compound net profit of 20%, and net asset value growth over the same period is 45%. The company has a strategy for each of its operating divisions which shareholders may be informed of at our annual general meeting,” FoneWorx said.
The company also highlighted its transparency.
FoneWorx said further that the tactic and strategy adopted by William Kirsh has been to apply a bullying approach aimed at control and creating a board that effectively “rubber stamps” his wishes.
The group said it believes that this ultimately doesn’t bode well for building a board or management team which is democratic and cohesive.
“His tactics, emotional outbursts and divisive approach have only resulted in alienating the FoneWorx management team. A strategy to force two parties together under these circumstances can only result in destroying value,” the group said.
“In conclusion we believe that the Kirsh family´s hostile approach is inappropriate and a mischievous attempt to discredit a well-managed company in order to try and implement an agreement to acquire businesses which they control and the company´s cash reserves in a manner for a purpose which the board strongly oppose.
“Shareholders are advised that there is now a dispute between the Kirsh family and the company as to the status of the sale agreement and/or its implementation,” FoneWorx said.
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