Bluescope share scandal, AWB AGM and Wapping payout
July 16, 2008
Here are Stephen Mayne's three stories from the Crikey edition on Thursday, 23 February, 2006.
2. Bluescope CEO's well-timed share play
By Stephen Mayne, unhappy Bluescope Steel shareholder
In the lexicon of well-timed share plays by directors, Bluescope Steel CEO Kirby Adams has joined the list with a $9 million put option deal that pre-dated a shock profit warning by just six weeks. The chronology is not a good look, but we won't say any more than that for now:
23 August, 2005: Bluescope Steel releases profit headlined "record annual results top $1 billion".
15 September, 2005: The benchmark price for steel (called hot rolled coil) was $US434 a tonne, down some 30-40% on previous highs. For a company that makes 50% of its earnings from HRC, Bluescope should have known that its earnings would come under pressure.
23 September, 2005: With the share price above $10 and near a record high, Kirby Adams takes out a "zero cost collar transaction" with ANZ which includes put options over 900,000 of his shares. This "has the effect of protecting the value of a portion of Mr Adams's shareholding at a level below the current share price". In other words, Adams used a financial instrument to lock in some profits and cover the downside.
27 September, 2005: Kirby Adams addresses JP Morgan's tenth Annual Asia Pacific Equity Conference in New York City with an upbeat presentation entitled "Continuing to Reward Shareholders and Deliver on our Strategy".
3 October, 2005: Kirby Adams belatedly informs the market about his options deal with ANZ.
2 November, 2005: Stupid Stephen Mayne buys 60 Bluescope Steel shares at $8.36 a pop
4 November, 2005: Bluescope issues shock profit warning, predicting 2005-06 earnings of 85c-100c a share, a fall of up to 38%. Shares plunge $1.26 (14.5%) to $7.43.
8 February, 2006: Bluescope issues another shock profit warning predicting 2005-06 earnings of between 65c-75c a share. Shares plunge 90c to $6.56.
19 February, 2002: Bluescope announces 38% drop in half year profit to $312 million.
22 February, 2006: at 11am this morning Bluescope is trading at $6.71, about one third below the level when Kirby entered his arrangement with ANZ on September 23.
Assuming a floor price of $9.50, Adams has saved himself $2.5 million, not bad for someone on a salary of more than $4 million a year who has also been given more than $5 million worth of free shares. I'll be raising all of this at the next Bluescope AGM.
20. Slugging it out with the AWB farmers
By Stephen Mayne, disorganised activist and AWB shareholder since yesterday
Ever since quitting a Sydney-based role at The AFR in September 1999 to run against Jeff Kennett in his seat of Burwood and discovering that I was ineligible due to still being enrolled at 77 Queen Street, Woollahra, it's been clear that getting administratively sorted for activism tilts has not been a strong suit.
Well, old habits die hard, because yesterday I discovered that AWB was not in my highly geared 80-strong portfolio of shares. Yes, despite all this anticipation, I'd failed to buy the token $500 holding to get access to the microphones at today's AGM. What a goose.
I subsequently bought 250 shares at $4.09 a pop yesterday but won't formally be on the share register until next week. Attempts to flash the contract note at the registry people to sit with the shareholders will probably fail, so it will be an afternoon at Melbourne Park sitting in the sealed off media section, watching farmers slug it out for a few hours.
The board will almost certainly decline to comment on matters before the Cole Commission but it should still be a cracking AGM, particularly given the culpability of executive chairman Brendan Stewart, who has just been booted off Mark Vaile's Iraq delegation and is facing re-election today.
Various farmers are promising to turn up to give the board a spray but only A class shareholders, primarily farmers, can vote on the contested board elections which sees six candidates shooting at four spots.
Let's hope today's gathering joins the other great AGM bunfights from over the years, which include Westpac's two-day effort in 1992-93, the last hurrah for John Elliott at Elders IXL in 1991, the last HIH gathering in 2001 and Solly Lew's Coles Myer demise in 2002.
23. Rupert's Wapping great redundancy bill
By Stephen Mayne
The biggest dent in News Corp's second quarter earnings release this month came from the $US99 million redundancy charge for the 700 production staff who will be axed from its UK newspaper division over the next three years as part of a major printing plant relocation project.
London's Daily Telegraph latched onto this aspect of the profit figures last week, but don't feel too sorry for Rupert because he's confidently predicting a windfall profit of $US100 million this year alone from the sale of surplus land at Wapping.
London's property bubble has clearly made it worthwhile for News Corp to vacate most of its sprawling East London home base and they will be doing much better than the sale of its giant Melbourne headquarters which only fetched $18 million when Lachlan Murdoch decided to sell to David Marriner a decade ago.
It's a phenomenon that's apparent around the world and there's even been recent talk that Rupert will shift The Mercury, which is based on increasingly valuable land in Hobart. The same applies to The Sunday Times which is right next to the popular Northbridge night club district in Perth.
The axing of 65% of the UK production staff, who will receive an average payout of almost $200,000 each, comes on the 20th anniversary of Rupert's legendary Wapping ambush of Britain's notorious print unions which News Corp President Peter Chernin has described as the world's most pivotal labour relations struggle in 40 years.
How fitting that they've taken the redundancy charge in the quarter that falls right on that Australia Day anniversary, which wasn't exactly overtly celebrated by those involved.
Copyright © 2024 The Mayne Report. All rights reserved
