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Reprieve for S.Africa's Old Mutual as court rules against fired CEO

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01/14/2020 | 06:07am EST
Workers clean windows outside the Cape Town headquarters of Anglo-South African financial services company Old Mutual

A South African High Court ruled on Tuesday that Old Mutual does not have to reinstate its sacked chief executive Peter Moyo, a shift in legal fortunes for the country's No.2 insurer that drove its shares up more than 5%.

Old Mutual has been locked in a dispute with Moyo since it suspended him in May 2019 over an alleged conflict of interest. He was fired the following month then temporarily reinstated by the courts in July in a ruling that blocked the insurer from seeking a replacement.

Tuesday's ruling marks the first significant court victory for the group after a series of embarrassing losses that have rocked confidence in one of South Africa's oldest companies and knocked over 10% off its share price.

The written judgement said that the interim order temporarily reinstating Moyo should not have been granted in the first place. "The irreparable harm which Old Mutual... its shareholders, employees and other stakeholders stand to suffer if the interim interdict is allowed to stand, requires no imagination or elucidation," it said. Moyo said in a statement he was still studying the judgement but added there was a "very, very good chance that we are actually going to appeal".

His lawyer said he would proceed with a longer case against his dismissal, in which Moyo is seeking permanent reinstatement or damages. Tuesday's court decision means Old Mutual will not be forced, for now, to work with a CEO whose reinstatement it has repeatedly said is "untenable".

A spokeswoman for Old Mutual said it was vindicated, and the board was now mandated to seek a new CEO.

Its shares rose more than 5% after the ruling, and were still up 3.51% at 1011 GMT.

CREDIBILITY

Some shareholders were concerned that Moyo's dismissal was sloppily handled and that the drawn-out public battle was distracting from day-to-day operations.

Jacques Plaut, portfolio manager at Allan Gray - Old Mutual's second largest shareholder - said he was pleased with the result, though he expected the market to have priced in a positive outcome for the insurer.

"This is good for the company and for governance in South Africa," he said.

While it is not the end of the road legally for Moyo, who said he could indicate whether he intends to appeal within the next few days, it is a blow to his case.

He will also have to seek leave to appeal from the Supreme Court of Appeal.

Warwick Bam, analyst at Avior Capital Markets, said the decision gives some credibility to Old Mutual's board and its handling of Moyo's dismissal and the subsequent fallout, which in turn eases any concerns of further departures at the top.

"[Old Mutual] can now quite confidently go ahead and start putting... strategic actions into place without being concerned that Peter Moyo may still have a hand in the business," he added.

(Editing by Tim Cocks and Emelia Sithole-Matarise)

By Emma Rumney

Stocks mentioned in the article
ChangeLast1st jan.
DOW JONES AFRICA TITANS 50 INDEX 0.03% 538.66 Delayed Quote.0.45%
DOW JONES SOUTH AFRICA(ZAR) -1.64% 1809.53 Delayed Quote.1.83%
S&P AFRICA 40 INDEX -0.55% 167.8 Delayed Quote.-2.51%
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