Farewell Hudson Conway meeting

Any good PR person knows that the Saturday papers have early deadlines, less space for news stories and are generally not followed up by the morning shock jocks such as Neil Mitchell or Alan Jones who don't work weekends.

Therefore, if you've got bad news to trot out, do it on a Friday. And so it was with Hudson Conway, the property developer turned Crown casino creator which is controlled by Lloyd Williams, Kerry Packer and Ron Walker.

After months of wrangling with regulators, independent experts, institutional investors and his fellow board members, Lloyd Williams had finally got his sweetheart HudCon privatisation deal into an acceptable form to go to shareholders for a vote.

Acceptable to his mates and a few faceless institutions on the share register that is. Most of the small shareholders who attended the meeting opposed the deal because even the board was saying if conferred a benefit of between $25 million and $45 million to Lloyd.

How Lloyd built his fortune

Now Lloyd has built his estimated $170 million fortune using a pragmatic combination of charm, mateship, risk-taking, deals, compromises and vision. This weighed heavily on my mind when he called nine days before the shareholder meetings. As first I thought he'd be ringing to bollock me and maybe threaten a lawsuit based on some of the things that have been said written on this website. The departure of Jeff has certainly changed Lloyd's life for the worse. I almost fell off the Burwood pavement that was being pounded when Lloyd said he wanted to discuss ''future commercial opportunities''.

The cynic in me said this might be an attempt to compromise me before the shareholder meetings or a move on behalf of his Packer mates to take me out of the game. Then again, what he was suggesting sounded interesting and was broadly going down the path I'm looking at taking jeffed.com. So, after a brief chat we agreed it was not appropriate to talk at any length before the shareholder meetings and we'd catch up in the week before Christmas.

Lloyd a future partner?

The wash-up from the Burwood by-election and preparing for the big bank AGMs left me with no time to prepare for the HudCon meetings. I turned up at the Melbourne Convention Centre at 9.15am having confused which meetings I was supposed to attend. Lloyd was surprised to see me and sat down for 10 minutes to discuss what he had in mind for the future. Not surprisingly, he also dropped out that 98.4 per cent of proxies had voted for the scheme. The rest of the board then filed into the room for the meeting of partly paid shareholders and Lloyd warmly introduced me to chairman Sir Rod Carnegie who drily remarked that we last met when I was abusing him at the John Fairfax AGM. Even Ron Walker shook hands with a smile, further anecdotal evidence of the venom and hate that has disappeared from Victoria since the passing of Jeff.

I was sent on my way until the 11am meeting so thankfully this gave me 90 minutes to start reading the mass of independent experts reports on Lloyd's sweetheart deal. Paula, Hugo and I gathered at a Crown cafe, Brubakkers, to prepare for the meeting and then wandered back to the Convention Centre to join about 60 other small shareholders for some fun and games starting at 11am.

How they lined up

Sir Rod opened the batting with apologies for independent director Barry O'Callaghan who had been hospitalised. This was a nuisance because Barry is the closest thing HudCon has to an independent director since the departure of Geoffrey Cousins in a blaze of controversy a couple of years back. Craving respectability to the last, the board had Tony Greenwood, a partner at legal firm Blake Dawson Waldron and former deputy to Henry Bosch at the National Companies and Securities Commission in the 1980s, sitting on stage with them to deal with any curly legal questions. Lloyd sat himself between Sir Rod and Ron as the three founders of HudCon lined up shoulder to shoulder for their farewell public appearance. Packer mate Sir Laurence Muir, another respectable establishment link for the boys given his knighthood and background with the old blue blood broking house Potter Partners, sat to Ron's right and the 74-year-old even got a little hug from the big red head when he was re-elected to the board.

Small shareholders take aim

Once Sir Rod dealt with the preliminaries and gave a brief introduction about the scheme, the floor was opened to questions. It did not take long for the message to be sent in no uncertain terms that small shareholders were very unhappy with the deal. In another example of their shortcomings, the Australian Shareholders Association did not turn up to the meeting which was essentially approving a deal backed by the big boys to the detriment of small shareholders. If there was one meeting they should have been on their soap box about this year it was this one.

Peter McLaren, a stockbroker with Johnson Taylor spoke very well against the scheme and even had some of his clients there watching. Several shareholders were less polite than Peter. Tom Willcox stood up and demanded: ''I would not even get back my $7.30, that does not seem to be a very good deal. Who are the real winners and losers, Sir.''

Sir Rod responded that ''on balance'' it was better to swap two HudCon shares for three PBL shares because he has ''considerable confidence that PBL will go up in value.'' Sir Rod, who has a tendency for flakiness, then added: ''I feel myself as a loser over a period of seven years.''

Peter McLaren made some very salient points which included some praise for the ASIC which gave shareholders the Wayne Lonergan, Price Waterhouse Coopers view of the world. This suggested Lloyd stood to make between $42 million and $62 million from other shareholders out of this deal. McLaren seized on the word ''expropriate'' in the report which he pointed out carried a dictionary definition of ''seize or disposess''. This preceded his clarion call that the deal was ''an oppression of minorities'' which of itself should be enough to vote it down.

Attacking the Independent Expert

In dealing with this, Sir Rod gently criticised Wayne Lonergan's independent report saying that KPMG's previous history in dealing with HudCon meant that it ''has a more informed position'' than Lonergan who did not enjoy the same ''experts view position''. Sir Rod also correctly pointed out that the rise in the PBL share price to $11.30 since the reports were done meant that $15 million of tax loss benefit going to Lloyd were actually being used up by the other shareholders. McLaren made the very salient point that with PBL shares at $11.30, HudCon had a net asset backing of $8.80 yet the shares were only trading at $7.30 based on the deal being put forward. This really did cut to the heart of the matter - that Lloyd, who owns 27 per cent of HudCon, is being dealt between 30 and 35 per cent of the value. Sir Rod's best offering was effectively that Lloyd would not cede any more ground. You can't imagine Lloyd being enamored with old Sir Rod when he told shareholders: ''We (the directors) would feel he is not a very generous man,'' he said. ''We would feel that totally.'' Surely, Sir Rod, if you weren't satisfied with the deal why did you sign up to the terms and front the meeting backing it.

Shareholders Association missing in action

Despite the ASA being missing in action again, I was the fourth shareholder to make a contribution and much of what needed to be said had already been aired. My first offering was to seek an update on the cash and debt position of the company. You see, the more unsecured noteholders who accept Lloyd's offer to redeem their notes early, the greater the benefit to Lloyd. While HudCon has payed back its $130 million bank debt since the reports were produced, there have been limited acceptances of the offers by Lloyd to take out the two sets of noteholders who are owed $250 million. The noteholders, led by the billionaire Haines family, whipped up a great hue and cry about Lloyd's first offer which has been sweetened by about $17 million and now looks likely to be swamped in the weeks ahead.

Earn your keep, Sir Laurance Muir

It is always good to get directors other than the chairman to earn their keep and speak at meetings where necessary. Therefore, my next question was to ask Sir Laurance Muir to explain why he supported the deal as he is the closest thing to a HudCon independent director. Sir Laurance is an old Herald & Weekly Times director and, according to some people at News Corp, he was Rupert's spy on the board during the takeover battle back in 1987. Sir Laurance has proved popular with media moguls as Kerry Packer took him onto the board of PBL where he is not exactly a rock the boat type of director. Anyway, Sir Laurance was offered the microphone by Sir Rod - there ain't any other Australian companies with two knights on the board - and explained that there was much cleaning up to do in the HudCon shell. Afterall, the British tax authorities were still looking into the Pubco deal after eight years and he said we were ''about as far from a solution than we were eight years ago''.

We then got something of a contradiction from Sir Laurance when he said that: ''I am grateful to leave the cleaning up of this to Lloyd'' and that ''I want my direct stake in PBL as soon as I can''. The older of HudCon's two knights only owns 20,000 HudCon shares partly paid to $1.05 and collects $50,000 a year for being a director. He seemed to be talking as someone about to retire from the board and taking the perspective of shareholder not a director. But page 33 of the report contains the following: ''Mr LJ Williams has advised that if the Schemes are implemented he intends to invite each of the non-executive directors to remain on the board, including Sir Roderick Carnegie to remain as chairman.'' So Sir Laurance will still be wrestling with all that uncertainly over the UK tax problems and part of the ''great expense'' of continuing with HudCon in its present form will continue. Put more bluntly, the non-executive directors who controversially endorsed this scheme will remain on Lloyd Williams' private payroll. Let's hope this offer did not in any way affect their judgments as they negotiated night and day with Lloyd on behalf of us minority shareholders.

Sir Rod no independent

Sir Rod was trying to say he, like Sir Laurance, was an independent director but he is not really. His independence was compromised by having to rely on financial support from both Kerry Packer and Lloyd when he ran into financial trouble - a $30 million hook as it was called by the Fin Review at the time - a couple of years after the 1987 stockmarket crash and his own car crash. The next two biggest shareholders after Lloyd - Kerry Packer and Ron Walker - were both backing the deal but these three have done so many deals together over the years that conferring a benefit to Lloyd was just another swing on their corporate roundabout. It's the people who own the remaining 35 per cent of HudCon who are really suffering and that is who independent directors should have been standing up for. Sir Laurance is a director of PBL, a friend of Lloyd's and was at the Packer wedding so his speaking on behalf of ''the independents'' just demonstrates the paucity of independents on the board. The ASIC did partly step in to fill this gap on behalf of small shareholders but the group which should really have been up in arms is the institutional shareholders.

Institutions remain silent as ever

On two occasions I invited Gary Weiss, who was there representing Sir Ron Brierley's GPG outfit, or any other institutional representative at the meeting, to speak to small shareholders and explain why they were supporting this deal. Afterall, these institutions manage the superannuation savings of millions of Australians and should explain why it was good for their savings to confer such a huge benefit to Lloyd Williams. On both occasions Gary Weiss and any other institutions present declined to explain their actions. Major institutions in the top 20 shareholders include Norwich Union, MLC and, interestingly, both the Victorian Superannuation Board and the Victorian WorkCover Authority. Given the Labor government's long running campaign against Lloyd Williams personally, maybe finance minister John Brumby and WorkCover minister Bob Cameron should ask these two state authorities why they voted in favour of a deal which appeared to transfer value from the taxpayer to Lloyd Williams. The deafening silence of Australia's institutions is highly lamentable as Australians increasingly want fund managers who are prepared to die in a ditch for their money. I suspect there could be a market one day for a fund manager offering highly public agitation. The conspiracy of institutional silence surrounding the HudCon privatisation is a classic case in point.

Alternative proposals

With shareholder anger at the proposal evident for all to see, the focus of the meeting shifted to alternatives which the directors were clearly not going to countenance. One shareholder suggested seven HudCon shares for nine PBL would have been fairer and another young shareholder Ben Morrison recommended the company pay a deferred dividend to all shareholders once it was clear how much was left in HudCon after the Lloyd clean up operation. I then stood up again and suggested that shareholders should have been given the alternative of taking the PBL shares or opting to stay with Lloyd. Afterall, this proposal basically meant all of us were being shown the door from HudCon, when many of us would have opted to stay with Lloyd - particularly given that HudCon's directors admitted this is where much of the value was being shifted to. Sir Rod's answer included the line that Lloyd had ''not found being involved in public a very comfortable position'' and that ''the glare of publicity is not something that everyone wants to live with''. Lloyd certainly ran HudCon for many years as if it was a private company but he craved publicity whilst running Crown. Who can forget the 1996-97 annual report which featured Lloyd pictured on five separate occasions with various celebrities. Publicity was certainly good for Crown's business but Lloyd appeared to revel in it, even posing with half-naked dancers for the media. Then again, Lloyd certainly looked uncomfortable during Friday's meetings and was very reluctant to speak to the media. Maybe he really is shy or maybe he is just shy about talking up this deal given that it is so beneficial to him.

Hudcon the dog? Not really

The general tone from Sir Rod and several shareholders was that HudCon had been a dog of a stock when this is entirely dependent on when you bought in. I pointed out that he was being somewhat modest as HudCon shares were trading at $2.85 two months before it won the casino tender in September 1993. With the stock now at $7.30 this was a return of almost 300 per cent from Crown, which amounts to about $60 million for Lloyd and $30 million for Ron Walker. With the directors suggesting Lloyd was being transferred an extra $25 million to $45 million in value, that's up to $105 million for Lloyd from dealing himself into and out of Crown and then dealing the other shareholders out of HudCon. Every step along the way has been controversial and involved stoushes with regulators, but at the end of the day Lloyd has prevailed and his net worth has tripled.

Lloyd's redundancy payout and the golf deal

Without wishing to prolong proceedings unnecessarily, my last offering raised the question about the golf course valuation and whether Lloyd would have picked up the same retrenchment package that Ron Walker got if shareholders rejected the scheme of arrangement and then he decided to leave the company. Injecting some much-needed levity into proceedings, a sullen-faced Lloyd responded ''I hope so'' when Sir Rod suggested he would collect something like the $4 million Ron took home this year if he were to be retrenched. Sir Rod explained that the Capital Golf Club had been written down in value to $30 million, primarily because the local council had stomped on HudCon's plans to develop more housing around the edges of the course.

Lloyd then said the golf course was on a three month lease to PBL and they would make a decision about its future in February. This strikes me as very odd. If PBL decides to lease it for $5 million a year, Lloyd will have done very well against the valuation but if the Packers decide to send their highrolling golf enthusiasts to another course which offers a better deal, then Lloyd is left holding something of a stranded asset. Surely Lloyd and the Packers should have thrashed out a long term golf course solution and let shareholders know either way before Friday's vote.

Voting time

With the discussion over, Sir Rod called on shareholders to fill in the voting cards and slip them into the ballot boxes. Given the small possibility of a future venture with Lloyd, I decided to abstain even though my instincts lent towards loding a protest vote that would be defeated by Packer, Walker and institutional proxies anyway. Reflecting the discontent from the floor, 105 shareholders representing 1.68 per cent of HudCon's shares opposed the scheme. Only 78.9 per cent - or 393 voting shareholders - voted in favour of the scheme but they accounted for 98.32 per cent of the shares voted. In other words, the big shareholders backed Lloyd's sweetheart deal but 105 small shareholders tried to vote it down. Sadly for some, the big boys prevailed.

Two more meetings

The meeting to approve the scheme of arrangement wound up at about 12.30pm but shareholders reassembled at 1pm for a separate general meeting to approve some uncontroversial technical matters giving Lloyd some financial assistance to implement the scheme. This finished at about 1.15pm and the numbers further dwindled ahead of the AGM which kicked off at 2pm. The few shareholders who gathered around the plates of sandwiches were not happy with Lloyd's sweetheart deal and the directors did not use the time to mingle with their disgruntled small shareholders. Instead, they stayed behind closed doors in an adjacent room, although Sir Rod emerged for a press conference at one point.

The last Hudcon AGM

The last ever HudCon AGM was a very brief affair, the only thing that really happened was a five minute ''ode to HudCon'' that I read out. However, as this piece already approaching 5000 words, I'll deal with the ode on a separate page because The Age's subsequent coverage has thrown up a few interesting issues. After the AGM, Lloyd and Sir Rod both popped over for a chat as did Peter McLaren who was considering exploring alternatives to stop the deal proceeding. Lloyd then slunk off with barely a passing word to the press accept to say the future was about ''Lloyd dot com''. We can't wait to see what that means.

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