The Supreme Court judgement has paved way for holding
the Annual General Meeting (AGM) of Adamjee Insurance Company and
election of directors. The judgement must have brought some peace of
mind to the small shareholders who have not received any return on their
investment for the period the legal battle was fought. While it may not
be right, as it may tantamount to 'contempt of court' to pass any
comments on the Judgement, it may be of some interest for the investors
to look at the possible future moves of petitioners as well as the
An interesting situation has been created as the
company has notified Karachi Stock Exchange that the Board of Directors
meeting, for approval of annual accounts, scheduled for March 30, 2004
has been deferred. The reason for the postponement was said to be the
Supreme Court Judgement. There are two point of views regarding this act
of the sitting Board of Directors. Some analysts say, " As such
approval of accounts should have not been a cause of concern".
However, other believe, "The annual accounts may contain certain
'year end appropriations' which were feared to be questioned at the
annual general meeting. Therefore, additional time was required to
prepare the revised accounts".
It may be pertinent to point out once again that one
should abstain from calling this a 'hostile take-over'. Calling it a
hostile take-over gives an impression that the highest court of the
country could not protect the interest of current sponsors of the
company. Whereas, the realty is that the court judgement has created
conducive environment for holding the election of directors. And only
time will tell that who controls the majority share or has the power to
solicit proxies. The next election of directors could be termed,
Proxies will play a very important role as was
witnessed at the last election of directors. It is understood that
Adamjee family enjoys/controls 40% votes and the new incumbents also
control an equal number of votes. Those who have the potential to change
the equation are the financial institutions. In the last election
financial institutions has brought their own nominees on the Board. It
is yet to be seen whether they follow the same strategy or prefer to
join one of the groups.
It may be very unfortunate but a harsh reality that
alongwith the sponsors, the new incumbents will be participating at the
highest level of decision making, at the Board of Directors. Sharing
powers with those who were resisted to the maximum means that the
heart-burn will continue for some time. It will not be easy sail for
either of the group. While the new incumbents may be over-zealous in
turning around the operations of the company, the old-guards may not
like replacement of some of their 'most trusted' ones. Will there be
large-scale horse trading, as described in the politics?
According to an analyst' "Adamjee's stand was
very weak. However, they wanted to retain the company under their
control as long as possible. In this attempt millions of rupees must
have been paid by both the parties to attorneys. The wining party may
say that fees paid to attorneys is the cost of acquiring control of the
company, which was not possible otherwise". However, the
shareholders certainly feel that the fees paid to attorneys has deprived
them from the return on their investment, had this money not paid to
attorneys it would have been either distributed as dividend or kept as
Soon after the Court decision, price of shares of
Adamjee Insurance Company went up considerably. The general perception
was, "Accumulate as many shares as possible because both the
parties will be the buyers". This euphoria was created by the
rumours that both the parties are accumulating as many shares as
possible before the AGM to ensure the maximum number of their
representatives on the Board of Directors.
The rumour mill was very active and it is still
active. It also churned a rumour "Mansha Group is interested in
selling its stake to Adamjee family". The possible price at which
deal could be struck was floated as high as Rs 200/share. However, this
rumour died quickly because the quoted price was unrealistic/too high.
On the second thought, many speculators were convinced that none of the
party would be willing to offer such a fabulous price.
However, only a novice could believe this rumour.
Many rejected it on the grounds that the new incumbents have come to
stay and also have the expertise of managing the insurance business.
Since Adamjee Insurance Company enjoys enormous upside potential,
departing with the stake in the company can only be termed a bad
proposal and no wise business group would like to commit such a mistake.
There is no tradition of electing representatives of
minority shareholders in the country. Often to provide a cover up one of
the directors is labeled as representative of minority shareholders and
fully supported by the sponsors. Ideally such a representative should
only be elected by the minority shareholders. It is the time SECP should
assert itself and change the rules of game by giving a ruling that
minority shareholders should elect their own representative.