Smedley, MFS, Stokes push-polling and Jones audio
February 2, 2010
Dear Mayne Report readers,
It has been a big day on our website with the most traffic for 15 days, primarily thanks to our rapidly expanding Rich List, which is up to 857 names..
And continuing the multi-media theme, we've discovered the audio of our comments about Alan Jones at the Macquarie Radio AGM last November. The answers were indecipherable but the sprays about inciting the Cronulla riot, Jonestown, conflicts of interest over the Qantas bid, being too close to John Howard, unfair attacks on the media regulator, applying for the Wallabies coaching job and the failure to disclose the parrot's pay can all be enjoyed here.
In today's edition we've got an exclusive angle on why Spotless chairman Peter Smedley went hostile with a $556 million takeover bid for Programmed Maintenance Services. It's partly driven by a personal enmity for the chairman, which goes back to their days as competitors in the financial services business.
Later this morning I'll be coming in off the long run against Andrew Peacock at an MFS EGM. Click through to the full edition for a decent preview of what's in store.
We also can't resist taking a shot at Kerry Stokes for what was blatant push polling in his battle to win some control over WA News.
There's also some interesting information on a big governance conference coming up.
Finally, welcome to the big law firm and the top 30 public company which are today receiving their first Mayne Report updates as group subscribers. We're limited to no more than 500 subscribers under our non-compete agreement with Crikey, so why not tell your friends to reserve a spot while it's available as hard-hitting shareholder activism is going to be an exciting game for the next 15 months.
The action really begins in 9 hours time with Mr Peacock at The Westin. Subscribers will get a full account of what happened by lunch time.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
It has been a big day on our website with the most traffic for 15 days, primarily thanks to our rapidly expanding Rich List, which is up to 857 names..
And continuing the multi-media theme, we've discovered the audio of our comments about Alan Jones at the Macquarie Radio AGM last November. The answers were indecipherable but the sprays about inciting the Cronulla riot, Jonestown, conflicts of interest over the Qantas bid, being too close to John Howard, unfair attacks on the media regulator, applying for the Wallabies coaching job and the failure to disclose the parrot's pay can all be enjoyed here.
In today's edition we've got an exclusive angle on why Spotless chairman Peter Smedley went hostile with a $556 million takeover bid for Programmed Maintenance Services. It's partly driven by a personal enmity for the chairman, which goes back to their days as competitors in the financial services business.
Later this morning I'll be coming in off the long run against Andrew Peacock at an MFS EGM. Click through to the full edition for a decent preview of what's in store.
We also can't resist taking a shot at Kerry Stokes for what was blatant push polling in his battle to win some control over WA News.
There's also some interesting information on a big governance conference coming up.
Finally, welcome to the big law firm and the top 30 public company which are today receiving their first Mayne Report updates as group subscribers. We're limited to no more than 500 subscribers under our non-compete agreement with Crikey, so why not tell your friends to reserve a spot while it's available as hard-hitting shareholder activism is going to be an exciting game for the next 15 months.
The action really begins in 9 hours time with Mr Peacock at The Westin. Subscribers will get a full account of what happened by lunch time.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
Bully boy Smedley picks on Tomlinson again
Way back in June 2000 when the old Mayne Nickless recruited the Pacman, Peter Smedley, as chief executive, a prominent member of the Directors' Club told me that one condition of his employment was that Mayne director Geoff Tomlinson resign.
Lo and behold, on August 29, 2000 Tomlinson did precisely that, although the official rationale was a conflict of interest through his involvement in another healthcare company.
Smedley apparently developed quite a dislike for Tomlinson when they were rivals in the second half of the 1990s as the respective CEOs of Melbourne-based demutualising life offices, Colonial and National Mutual. Or maybe the rivalry goes all the way back to growing up in Perth during the 1950s and then going through UWA four years apart.
Whatever the cause, fast forward eight years from that Mayne Nickless incident and Smedley is at it again. Wearing his recently acquired hat as chairman of Spotless, he's launched a hostile $560 million bid for Programmed Maintenance Services which is chaired by Tomlinson.
Business Spectator's James Thomson describes the details of the hostilities as follows:
But what is surprising is that the takeover is hostile. While M&A activity outside the resources sector has largely ground to a halt this year, many of the big deals announced have been friendly, including the mergers of Incitec Pivot and Dyno Nobel's and Zinfex and Oxiana.
But according to Spotless chief executive-designate Jo Farnik, despite working on the takeover for “months rather than weeks”, the first contact Spotless has with its target was when Spotless chairman Peter Smedley phoned Programmed chairman Geoffrey Tomlinson this morning. Tomlinson and his fellow board members – still presumably reeling from shock – are yet to make a response.
The lack of communication between the two parties has surprised analysts, who have suggested that a more friendly approach from Spotless could have resulted in bringing the companies together via a scheme of arrangement, which would have been cheaper than a takeover.
Successful takeovers are all about people management. Smedley is an obsessive and aggressive acquirer having spent more than $10 billion on stuff whilst running Colonial, Mayne and then as chairman of Onesteel. Going hostile on a well-run company like PMS is not a good look and it's no surprise Spotless shares have tanked. Smedley also treated the Mayne Nickless doctors with contempt and look how much damage that caused. Besides, the risks involved in hostile takeovers without formal due diligence are well known. Just ask AMP about GIO or HIH Insurance about FAI.
Smedley is lucky to have been given another chance after stuffing up Mayne Nickless. At one level, Geoff Tomlinson is a lucky survivor as well. Flogging 51% of National Mutual to the French giant Axa at the equivalent of $1.25 a share in 1995 looks pretty stupid with the stock now at $5.56. In hindsight, it would have made more sense to sell down the booming Hong Kong division to raise capital, rather than control of the whole show.
Both of these gentlemen are examples of former CEOs having a final career in the Directors' Club, which is already becoming a long Mayne Report list. Arguably their records don't warrant it, let along a continuation of some long-standing feud. Bull-headed CEOs aren't necessarily cut out for the subtleties of a chairmanship and this over-priced hostile crack at PMS by Peter Smedley demonstrates the point.
Lo and behold, on August 29, 2000 Tomlinson did precisely that, although the official rationale was a conflict of interest through his involvement in another healthcare company.
Smedley apparently developed quite a dislike for Tomlinson when they were rivals in the second half of the 1990s as the respective CEOs of Melbourne-based demutualising life offices, Colonial and National Mutual. Or maybe the rivalry goes all the way back to growing up in Perth during the 1950s and then going through UWA four years apart.
Whatever the cause, fast forward eight years from that Mayne Nickless incident and Smedley is at it again. Wearing his recently acquired hat as chairman of Spotless, he's launched a hostile $560 million bid for Programmed Maintenance Services which is chaired by Tomlinson.
Business Spectator's James Thomson describes the details of the hostilities as follows:
But what is surprising is that the takeover is hostile. While M&A activity outside the resources sector has largely ground to a halt this year, many of the big deals announced have been friendly, including the mergers of Incitec Pivot and Dyno Nobel's and Zinfex and Oxiana.
But according to Spotless chief executive-designate Jo Farnik, despite working on the takeover for “months rather than weeks”, the first contact Spotless has with its target was when Spotless chairman Peter Smedley phoned Programmed chairman Geoffrey Tomlinson this morning. Tomlinson and his fellow board members – still presumably reeling from shock – are yet to make a response.
The lack of communication between the two parties has surprised analysts, who have suggested that a more friendly approach from Spotless could have resulted in bringing the companies together via a scheme of arrangement, which would have been cheaper than a takeover.
Successful takeovers are all about people management. Smedley is an obsessive and aggressive acquirer having spent more than $10 billion on stuff whilst running Colonial, Mayne and then as chairman of Onesteel. Going hostile on a well-run company like PMS is not a good look and it's no surprise Spotless shares have tanked. Smedley also treated the Mayne Nickless doctors with contempt and look how much damage that caused. Besides, the risks involved in hostile takeovers without formal due diligence are well known. Just ask AMP about GIO or HIH Insurance about FAI.
Smedley is lucky to have been given another chance after stuffing up Mayne Nickless. At one level, Geoff Tomlinson is a lucky survivor as well. Flogging 51% of National Mutual to the French giant Axa at the equivalent of $1.25 a share in 1995 looks pretty stupid with the stock now at $5.56. In hindsight, it would have made more sense to sell down the booming Hong Kong division to raise capital, rather than control of the whole show.
Both of these gentlemen are examples of former CEOs having a final career in the Directors' Club, which is already becoming a long Mayne Report list. Arguably their records don't warrant it, let along a continuation of some long-standing feud. Bull-headed CEOs aren't necessarily cut out for the subtleties of a chairmanship and this over-priced hostile crack at PMS by Peter Smedley demonstrates the point.
Coming off the long run at MFS this morning
The MFS board, complete with three new directors who were hostile to chairman Andrew Peacock and management, will be fronting shareholders at 9am in Melbourne this morning to deal with the earth-shattering issue of a name change to Octaviar. Check out the notice of meeting here.
I'll be there as a shareholder complete with separate sound and camera guys to try and capture the action and subscribers will get a special update as early as possible. The scratchy audio of last year's exchange's with former CEO Michael King is available here.
Peacock has promised a shareholder update, but it will be very interesting to see if he tolerates an open slather approach to questions. I've certainly got plenty, such as the following:
Is it true, chairman, that you're intending to quit? How do you work with new director Chris Scott when you told The AFR last month, “For reasons well known to Mr Scott, I have absolutely no respect for him whatsoever.”
How is CEO Craig White dealing with Citigroup's writ to recover $356,000 from a margin loan over MFS stock?
Exactly what exposures have the three listed MFS stocks got to the suspended $770 million MFS Premium Income Fund and its impending administration after Royal Bank of Scotland took control due to a $184 million default?
What the hell is holding up the half year profit? Just announce the $1 billion loss and get the stock trading again, regardless of who will be margin called?
Etc etc.
Here is the status of my various MFS plays:
MFS Diversified Group: bought 5,385 at 88c on June 26, 2007. Sold 5,200 at 88c on Oct 5, 2007. Changed name today to Geo, but will probably still go broke so remaining 185 shares probably worthless. Suspended but last traded 47c.
MFS Living and Leisure Group: bought 600 at 84c on Aug 17, 2007. Suspended but last traded at 37c and probably worthless. Changing name to Leisure and Living Australia at a shareholders' meeting on the Gold Coast next Monday.
MFS Ltd: bought 105 at $4.96 on Mar 5, 2007. Sold 90 at $5.73 on June 25, 2007. Remaining 15 shares have been suspended for two months but probably worthless after last trading at 99c.
MFS notes: bought 7 at $74 on Jan 18, 2008. Untraded since then but possibly worthless.
It's not as bad the $3650 dropped in the 9 different Allco plays but the eventual pain will probably end up exceeding $1000.
I'll be there as a shareholder complete with separate sound and camera guys to try and capture the action and subscribers will get a special update as early as possible. The scratchy audio of last year's exchange's with former CEO Michael King is available here.
Peacock has promised a shareholder update, but it will be very interesting to see if he tolerates an open slather approach to questions. I've certainly got plenty, such as the following:
Is it true, chairman, that you're intending to quit? How do you work with new director Chris Scott when you told The AFR last month, “For reasons well known to Mr Scott, I have absolutely no respect for him whatsoever.”
How is CEO Craig White dealing with Citigroup's writ to recover $356,000 from a margin loan over MFS stock?
Exactly what exposures have the three listed MFS stocks got to the suspended $770 million MFS Premium Income Fund and its impending administration after Royal Bank of Scotland took control due to a $184 million default?
What the hell is holding up the half year profit? Just announce the $1 billion loss and get the stock trading again, regardless of who will be margin called?
Etc etc.
Here is the status of my various MFS plays:
MFS Diversified Group: bought 5,385 at 88c on June 26, 2007. Sold 5,200 at 88c on Oct 5, 2007. Changed name today to Geo, but will probably still go broke so remaining 185 shares probably worthless. Suspended but last traded 47c.
MFS Living and Leisure Group: bought 600 at 84c on Aug 17, 2007. Suspended but last traded at 37c and probably worthless. Changing name to Leisure and Living Australia at a shareholders' meeting on the Gold Coast next Monday.
MFS Ltd: bought 105 at $4.96 on Mar 5, 2007. Sold 90 at $5.73 on June 25, 2007. Remaining 15 shares have been suspended for two months but probably worthless after last trading at 99c.
MFS notes: bought 7 at $74 on Jan 18, 2008. Untraded since then but possibly worthless.
It's not as bad the $3650 dropped in the 9 different Allco plays but the eventual pain will probably end up exceeding $1000.
Push polling from Kerry Stokes
Talk about push-polling! This is a survey that the Seven Network sent out to people who signed up to receive updates from the www.refreshthewest.com.au website.
1. Do you believe that the appointment of Kerry Stokes and Peter Gammell as directors will strengthen the board of West Australian Newspapers?
2. Shouldn't West Australian Newspapers have a board that is focused on building a company, not one with directors seeking only to defend their own positions?
3. Should Seven – which has invested $480 million in the company and as the largest shareholder in West Australian Newspapers - have board representation on the company?
4. Do you think the people of Western Australia deserve a better managed newspaper company?
5. Do you want The West to be an independent and respected voice in media in Australia?
6. Do you think Seven and West Australian Newspapers – as a television network and a newspaper - are competitors?
7. Do you believe that Kerry Stokes is trying to gain control of West Australian Newspapers?
8. Does it concern you that the board says that Seven is a competitor?
9. Are you happy with West Australian Newspapers' digital strategy?
10. Does the current performance of West Australian Newspapers – including falling circulations and a loss of advertising revenue in a booming WA economy – concern you?
11. Are you happy with the West Australian Newspapers' decision to cut dividends to shareholders?
12. Is the current Board of West Australian Newspapers doing a good job?
13. Do you think it's time for a revitalised West Australian Newspapers to step forward and become a stronger company with a new, broad, independent board that has media experience?
14. Are you a shareholder in West Australian Newspapers Holdings Limited?
15. Can you tell us whether you are currently intending to vote in favour of the election of the two Seven candidates. Please indicate if you are intending to vote in favour of Kerry Stokes and Peter Gammell.
Given that Stokes is running the closest thing to a political campaign since Solly Lew's attempt to stay on the Coles Myer board back in 2002, such questions have to be seen as push polling. However, it would be a lot more controversial if they started cold calling shareholders with a similar line of questioning. Given the huge newspaper ads, flyers to shareholders and even the proxy form that arrived on Wednesday, it would not be a surprise if such push polling direct to shareholders was the next tactic employed.
I filled in the survey and gave all the answers which the Seven camp wanted to hear, except for the question about Stokes seeking to gain control. You don't try to remove an entire board unless you want some element of control. The institutions need to decide whether they want Stokes as chairman and Stokes needs to specify if that is his goal. Stokes can't put his hand up for chairmanship whilst decrying suggestions he wants control.
2. Shouldn't West Australian Newspapers have a board that is focused on building a company, not one with directors seeking only to defend their own positions?
3. Should Seven – which has invested $480 million in the company and as the largest shareholder in West Australian Newspapers - have board representation on the company?
4. Do you think the people of Western Australia deserve a better managed newspaper company?
5. Do you want The West to be an independent and respected voice in media in Australia?
6. Do you think Seven and West Australian Newspapers – as a television network and a newspaper - are competitors?
7. Do you believe that Kerry Stokes is trying to gain control of West Australian Newspapers?
8. Does it concern you that the board says that Seven is a competitor?
9. Are you happy with West Australian Newspapers' digital strategy?
10. Does the current performance of West Australian Newspapers – including falling circulations and a loss of advertising revenue in a booming WA economy – concern you?
11. Are you happy with the West Australian Newspapers' decision to cut dividends to shareholders?
12. Is the current Board of West Australian Newspapers doing a good job?
13. Do you think it's time for a revitalised West Australian Newspapers to step forward and become a stronger company with a new, broad, independent board that has media experience?
14. Are you a shareholder in West Australian Newspapers Holdings Limited?
15. Can you tell us whether you are currently intending to vote in favour of the election of the two Seven candidates. Please indicate if you are intending to vote in favour of Kerry Stokes and Peter Gammell.
Given that Stokes is running the closest thing to a political campaign since Solly Lew's attempt to stay on the Coles Myer board back in 2002, such questions have to be seen as push polling. However, it would be a lot more controversial if they started cold calling shareholders with a similar line of questioning. Given the huge newspaper ads, flyers to shareholders and even the proxy form that arrived on Wednesday, it would not be a surprise if such push polling direct to shareholders was the next tactic employed.
I filled in the survey and gave all the answers which the Seven camp wanted to hear, except for the question about Stokes seeking to gain control. You don't try to remove an entire board unless you want some element of control. The institutions need to decide whether they want Stokes as chairman and Stokes needs to specify if that is his goal. Stokes can't put his hand up for chairmanship whilst decrying suggestions he wants control.
2008 Risk Metrics governance conference
The world's biggest proxy advisory firm, Risk Metrics, is holding its annual corporate governance conference on April 29 in Melbourne. I'll be there to check out the following line-up of speakers:
The Government's governance agenda
Nick Sherry, Minister for Corporate Governance
The new wave of accounting shenanigans
Marc Siegel, Head of CFRA - the world's leading forensic accounting firm
Are shareholders adequately protected under Australia's takeover laws?
Ross Barker, AFIC, Alan Bulman, Takeovers Panel, Tony Damian, Freehills
The great short selling debate
David Bryant, Australian Unity, Dominick Falco, Pan Asian Securities Lending Association, Michael O'Sullivan, Aust Council of Superannuation Investors
Class actions: friend or foe?
Rob Ferguson, IMF, David Atkin, C+BUS, Michael Legg, Clayton Utz
Executive pay: Reforming the framework
John Egan, Egan & Associates, Amanda Wilson, CBA, Prominent Fund Manager
Download the registration form here.
Corporate governance is making headlines again and this will be Nick Sherry's first major speech on the topic. I had a drink with a senior Federal Labor staffer tonight and there is certainly a strong interest in tackling these issues, if only to better protect Labor's beloved $1.1 trillion superannuation pile.
Governance professionals are also finding themselves in hot demand. Prof Geof Stapleton, Australia's leading academic on corporate governance, has just been poached from Risk Metrics by none other than BHP-Billiton to run its global governance program. It must have been a big offer.
The Government's governance agenda
Nick Sherry, Minister for Corporate Governance
The new wave of accounting shenanigans
Marc Siegel, Head of CFRA - the world's leading forensic accounting firm
Are shareholders adequately protected under Australia's takeover laws?
Ross Barker, AFIC, Alan Bulman, Takeovers Panel, Tony Damian, Freehills
The great short selling debate
David Bryant, Australian Unity, Dominick Falco, Pan Asian Securities Lending Association, Michael O'Sullivan, Aust Council of Superannuation Investors
Class actions: friend or foe?
Rob Ferguson, IMF, David Atkin, C+BUS, Michael Legg, Clayton Utz
Executive pay: Reforming the framework
John Egan, Egan & Associates, Amanda Wilson, CBA, Prominent Fund Manager
Download the registration form here.
Corporate governance is making headlines again and this will be Nick Sherry's first major speech on the topic. I had a drink with a senior Federal Labor staffer tonight and there is certainly a strong interest in tackling these issues, if only to better protect Labor's beloved $1.1 trillion superannuation pile.
Governance professionals are also finding themselves in hot demand. Prof Geof Stapleton, Australia's leading academic on corporate governance, has just been poached from Risk Metrics by none other than BHP-Billiton to run its global governance program. It must have been a big offer.