Don Argus donnybrook at Brambles in 2001

The Brambles meeting yesterday produced a good barney with chairman Don Argus, known to his friends and all dissenting shareholders as Don't Argue.

Conor Lally from AFR.com summed it up as thus:

"There were a few dissenting voices at the meeting, most notably from shareholder activist Mr Stephen Mayne, who was critical of Brambles for not having commissioned an independent expert review of the merger. He also said Mr Chow's salary of $3.5 million with $1 million in bonuses along with an $8 million "golden parachute" pay-off should he be sacked without 24 months notice as excessive."

Apart from erratic shareholder activist Jack Tilburn - who Brambles have been sucking up to for years and even got Jack to move a tribute to the retiring company secretary at the meeting yesterday - and one offering from the Australian Shareholders' Association's Ray Wagner, Crikey was the only contributor to the meeting. And despite out best efforts, the $19 billion dual listed structure with London-based GKN has been approved in a landslide of institutional complicity.

There are some striking parallels between the BHP-Billiton merger than Don Argus railroaded through in May and yesterday's deal.

To start with, Don't Argue is the chairman of both companies. In both cases he was facing a CEO succession question. Who would run BHP after Paul Anderson went back to Texas with his $40 million and who would replace outstanding Brambles CEO John Fletcher who announced he'd be quitting not long after Don't Argue took over as chairman?

Brambles, a company known for its management stability pre-Argus, also lost their finance director Michael Brown showing just how easy Don't Argue is to get along with. How ironic it is that the man who ran NAB with an iron fist and countenanced no boardroom dissent from his chairman is now one of Australia's most dictatorial chairmen churning through the CEOs.

ALLENS LOVE THESE COSY DEALS

Another BHP-Brambles parallel is the presence of Allen, Allen & Hemsley as legal adviser on the deal and the lack of an independent expert's report to reassure shareholders that this was good deal. Don't Argue reckoned this would be a waste of money and we should trust him.

Given that Brambles spent $45 million packaging this deal, another $1 million on an independent expert's report was chicken feed and it would have provided some impartial balance from all the overpaid advisers and pay-rise receiving directors who had a vested interest in the outcome.

TWO HEAVY HITTERS LEAVE LONDON FOR OZ

BHP-Billiton and Brambles-GKN also both involved bringing a London-based executive to Australia to run the combined business after getting a huge pay rise from Don to ensure they are appropriately incentivated.

Legendary former Brambles CEOs Gary Pemberton and John Fletcher must be looking on in envy at CK's great deal which I pointed out to the meeting included a base salary of about $3 million, an annual cash bonus of up to $1.5 million, a $5 million gift of Brambles shares if the earnings per share grows by more than 15 per cent and a cash payout of $8 million if CK is sacked for poor performance without being given a massive two years notice.

CHOW'S GOLDEN PARACHUTE

We had a ding dong argument over this one with Don disputing the use of the phrase "golden parachute" to describe the $8 million CK Chow will get if sacked for poor performance. If these CEOs are any good they shouldn't need to build in huge protection on their employment. GE CEO Jack Welch had a one-page contract that said he could be sacked any time for no reason and with no compensation. This all sounded good until Don't Argue pointed out that Jack Welch got a $US80 million Golden Goodbye payment, although my response was that the board chose to do this and were not compelled by some prescriptive contract.

Imagine if Brambles had to give a dud truck driver 24 months notice. Don't Argue claimed that CK needed this protection because he was leaving London and bringing his family out. I suggested he should be promised a first class airfare back home and reimbursement of his relocation costs if things don't work out, rather than an $8 million golden parachute. And extending this deal both ways should see CK Chow paying Brambles $8 million if he goes somewhere else without giving the company 24 months notice. This produced yet another scoff from Don't Argue.

DIFFERENCES WITH BHP

There are a couple of key differences in the merger also, one of which independent director Graham Kraehe, Rupert's newest independent director on the News Corp board, pointed out after the meeting. Because 80 per cent of the business will be the Chep and Cleanaway 50-50 joint ventures which have performed magnificently over 27 years for Brambles and GKN, the two companies know what the other is bringing. BHP did not know much about Billiton's high risk assets in far-flung places such as Colombia and Mozambique.

Another vital difference was that BHP's management had destroyed $10 billion in 10 years and were discredited whereas Brambles have a great track record.

And the other key differences were that Brambles-GKN did not build in a $100 million break-fee like BHP-Billiton did and Brambles is not paying a premium like the cool $5.5 billion that Don't Argue and his mates handed over from BHP to the hard heads at Billiton.

Despite the lack of a premium, it would have been nice to read an independent expert's report just to get some comfort on the Brambles merger. GKN are not exactly bringing quality assets to the equation. There is a chain of muffler stores in the US and a pallet stacking business which both look pretty crappy. Contrast this with the wonderful records management Recall that Brambles is pumping in and you've got to ask yourself whether Brambles shareholders should have got more than 57 per cent of the combined group, especially with the deal being earnings dilutive for Brambles in 2001-02.

IS MANAGEMENT STABLE

Don't Argue started getting really cranky about the BHP comparisons towards the end. When I started talking about management stability he tried to cut me off. Eventually I was able to frame the question by saying that Don had told BHP shareholders the company would wither on the vine without merging and would also fail to attract top managers. Sure enough, a few weeks after the meeting Billiton's highly regarded chief financial officer Mick Davis jumped ship. I asked Don if he was aware of any top Brambles managers looking to follow this lead and he said no.

THE LOSS OF JOHN CLONEY

QBE chairman John Cloney is one of the few legends in the professional director circles. There are no skeletons in his closet yet he is quitting the Brambles board after the merger. When asked why, Don said the travel was going to be too much for Cloney. So why is Brambles adopting a new structure that one of its best directors can't accommodate when the old structure was working beautifully for 27 years? And why weren't the institutions asking this question yesterday?

HOW BIG IS THE MACQUARIE FEE?

Voluble Jack Tilburn indulged himself with a few questions at the beginning of the meeting and his best one was asking for a break-down of the $45 million transactions costs, including the size of the success fee being paid to our friends at Macquarie Bank, the Brambles adviser.

Don't Argue continued the fine Brambles record of secrecy by refusing to disclose it. I'd like to know how much Allen, Allen & Hemsley were getting, especially given that Macquarie Bank non-executive director Kevin McCann just happens to be the national chairman of Allens.

It seems odd that two companies who have been living defacto for 27 years in adjoining apartments called Chep and Cleanaway have to pay $45 million to get married.

And if $45 million was to be spent, The Don could surely have set aside $1 million for an independent expert's report just to provide a bit of balance to all those with a vested interest in the deal going ahead.

CK had a huge vested interest and even Don't Argue cops a handy pay rise although finding out about it was like pulling teeth. The Don made about $40 million out of his NAB shares and has a wonderfully renovated mansion in Malvern as a result. But he still needs more and he'll be paid 180,000 pounds sterling a year for his efforts in chairing the enlarged group, a handy payrise but not as bad as the deal that CRA chairman John Uhrig cut for himself in 1996 when he sold out Australia and signed up for the Rio Tinto DLC which is now run out of London.

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