The right man for Anglo

Allan Seccombe | Fri, 10 Jul 2009 13:54
[miningmx.com] -- ANGLO American may have courted the displeasure of South African authorities by appointing John Parker as its new chairman, but many in the market are in no doubt he’s just the man to help steer the company for which Xstrata is making a merger bid.

The key question for investors must be how aggressive will Parker be in dealing with the board, possibly restructuring it, and bringing management to account in making the assets within the group perform better than they have been.

Parker brings with him an extremely impressive corporate history and a background in engineering, which some say is what Anglo is crying out for amongst the non-executive directors on its board.

“He’s regarded as someone who takes no nonsense and he has an understanding of how operations work. He can improve the way a company runs its assets. I think this man is a better chairman for the company,” said a London-based analyst.

Effective from 1 August, Parker replaces Mark Moody-Stuart who held the position for seven years.

The only downside is that the company, which under the tenure of Cynthia Carroll as chief executive has gone far in building up good relationships with the South African government, did not appoint a black South African.

The new mines minister Susan Shabangu made it clear in comments carried by a number of newswires that the government wanted a black South African in the role of chairman.

“We’re very glad that Anglo appointed Parker. They appointed the right man and not the right colour. It would have been bad for Anglo and South Africa if the company had buckled to political pressure,” said Des Kilalea from RBC Capital Markets in London.

The majority of Anglo’s shareholders are outside South Africa as are the bulk of its growth prospects and increasingly its asset base.

Parker is known and said to be respected by the market outside South Africa, a critical factor if it comes to capital raising, most of which would be raised on the global market and not so much in the country where Anglo has its start and roots.

“I’m not saying there is no one as capable in South Africa, but that person wouldn’t be known and respected here [London]. It’s not a question of colour, but who do the owners and the future owners of the company look to and respect?” Kilalea said.

SA GOVT WRONG-FOOTED

The South African authorities on the surface welcomed Parker’s appointment and said it looked forward to working with him, but behind the scenes they are smarting from the rebuff, especially after pushing so hard publicly to try force Anglo’s hand on the decision.

Mines minister Susan Shabangu told the newswires the government wanted a black chairman and on Thursday someone in her department leaked a short list of black candidates said to be drawn up by Anglo.

A South African fund manager said if the commodities market was still buoyant and there was no merger proposal from Xstrata it is highly likely Anglo would have chosen a black South African in the position.

“Under more normal circumstances I would have expected Anglo to appoint a person who would have close ties with the government and so on, but I understand the trade off they have made in the decision to appoint John Parker,” the fund manager said.

While building on a relationship with the South African government he’d have forged while co-chairman of paper and packaging group Mondi will be important it will be Parker’s decisions around the board and under-performing managers that the market is most eagerly anticipating.

“The current board hasn’t exactly covered itself in glory in recent years,” said the South African fund manager, pointing to the board driving strategy and having Carroll implement it.

“Part of the blame about where Anglo finds itself now lies with the board. It will be interesting to watch how aggressive Parker will be in bringing changes to the board, considering his relationship with it during his time at Mondi,” the manager said.

Kilalea said: “Anglo has not delivered on what we are constantly told are great assets. The board in a way has failed shareholders."

Mondi was spun out of the Anglo stable in 2007 and separately listed.

The Xstrata proposal was low down on the list of what analysts and investors wanted Parker to tackle. His hands are tied with the board’s outright rejection of Xstrata’s nil-premium merger proposal, but if that company comes up with a different offer, he could play a role in bringing the two companies together to talk about it.

South African financial institutions will want to meet the man they might not know as well as their UK-based counterparts to get a measure of the man and a sense of what he envisions for Anglo.