Shareholders back 2 Cheap deal

David Sena has been given the green light by 2 Cheap Cars Group shareholders to complete the purchase of Eugene Williams’ stake in the business, a move that will take his holding to about 76 per cent. 

The $4.3 million agreement between the pair was put to a vote at the company’s annual shareholders’ meeting, which was held at the Ellerslie Event Centre in Auckland and streamed online, on September 28.

With Sena and Williams – 2 Cheap Cars’ original co-founders – unable to vote on the proposed sale, it left the decision in the hands of those who hold less than a quarter of the company’s shares. Only a few shareholders attended the meeting in person.

A resolution to approve the acquisition was passed after more than 5.5 million votes, or 93.6 per cent, cast in person or by a proxy holder were in favour of Sena and his family trust buying Williams’ shares in the company. The number against was 376,771, or 6.4 per cent.

Michael Stiassny, chairman, told shareholders after voting had taken place that Sena should now be “very happy” and the turnaround in the company’s fortunes “has not been without difficulty”.

He added the breakdown between Sena and Williams had been “acrimonious, distracting for the business both from a governance and operational viewpoint, and detrimental for shareholder value”. 

Stiassny described the deal for Sena and related parties to acquire the stake held by Williams and his interests of about 30 per cent as a “significant milestone for the company and draws a clear line underneath the tensions of the past few years. The board and management look forward to focusing on growing the company, and the continued restoration of shareholder value”.

He said the transaction was viewed by the company’s independent directors as in the best interests of all shareholders because it will ensure it can “move forward positively at pace without further disruption and distraction”. 

“We were pleased to see our view supported by the New Zealand Shareholders’ Association [NZSA] following David’s discussions with them aimed at protecting the interests of minority shareholders,” said Stiassny.

“David has made a public statement of his intention not to utilise the ‘creep’ provisions of the Takeovers Code for a period of three years from the date of the share acquisition. 

“He also intends to maintain a majority of independent directors on the board, and enable consultation with minority shareholders and their representatives prior to the appointment of future independent directors.”

These statements of intent and their legal effect were released to the NZX on September 13. “I understand that in working with David on these commitments, the NZSA has accomplished a first for an NZX-listed company,” said Stiassny.

“I’d like to warmly thank the NZSA for engaging so genuinely on these matters, and congratulate it on achieving greater alignment between the interests of major and minority shareholders.”

Stiassny told shareholders that Sena was passionate about the business. “He is a car man through and through, and has been instrumental in getting 2 Cheap Cars back on-track by working hard to improve both its operational performance and share price. 

“He has an undeniable vested interest in the business achieving sustainable profitability, which clearly benefits all shareholders. We believe all shareholders will ultimately benefit from the company finally having the stability and aligned vision required to reach its potential.”

Stiassny acknowledged and thanked chief executive Paul Millward for his efforts since joining 2 Cheap Cars in January. “He hit the ground running. The year-to-date results are testament to his energy and focus.

“Importantly, I’d like to thank shareholders for the patience you have shown as we have righted the ship. 

“Your board firmly believes the strategy is sound, the brand offering is on-point in today’s economic climate, and the fundamentals are in place to continue to drive improved performance and profitability.”

Looking ahead

Stiassny reported that 2 Cheap Cars’ profit guidance had increased to between $5.2 million and $5.7m, and reaffirmed guidance that the company still intended to restart dividend payments. 

Its dividend policy is to pay between 50 and 60 per cent of net profit after tax. Based on the midpoint of its latest guidance, this would translate to a gross interim dividend of five cents per share and a full-year dividend at a similar level. 

Stiassny said: “The board makes final decisions regarding dividends only once results are approved at half and full year, in accordance with our dividend policy and acting prudently based on information available at that time. 

“To the extent expectations change, we will update the market. When the new board was appointed little more than a year ago, we had a clear goal to stabilise what was then a broken company. We have reset its foundations to focus on profitable growth and, importantly, restore shareholder value.

“That rebuild is now complete with the appointment of a new management team, new bankers and auditors, a singular focus on selling affordable vehicles and a market brand that does what it says on the can – 2 Cheap Cars. 

“This is a no-frills business. We have returned to its successful, profitable pre-listing roots by stripping out unnecessary cost, leveraging its supply-chain dominance and strengthening focus on expanding gross margins. Our recent guidance upgrade suggests that 2 Cheap Cars will achieve record profit for financial year 2024.”