Parliamentary disclosure, Bob Carr, Graeme Samuel, reckless Alan Wood and AGL hostility
July 22, 2008
Here are Stephen Mayne's five stories from the Crikey edition on Monday, 13 March, 2006.
2. Getting parliamentary disclosure right
By Stephen Mayne
Ross Coulthart has long been one of the Sunday program's best reporters and his story yesterday on all the political connections to the AWB share register had some merit.
However, at the outset it should be said that Alexander Downer and Christopher Pyne should not have been included just because they had some funds with Adelaide-based Argo Investments and Argo held AWB shares for two weeks after it floated in 2002.
Pyne and Downer had every right to react angrily. I've got $30,000 of super with AMP but please don't blame me for the fact that AMP has been a substantial shareholder in tree slaughterer Gunns Ltd for much of the past few years. Politicians can't control what a fund manager does and shouldn't be either held responsible or expected to know.
However, the other four examples produced by Coulthart had merit and it was especially amusing that he nailed Bill Heffernan for not disclosing a $4000 holding in AWB B class shares. For all his bluff and bluster, Heffernan was clearly caught out breaking the rules.
The failure of John Cobb and John Anderson to disclose their AWB A class shares is another interesting debate. These shares aren't worth anything but do allow grain growers to control the AWB board as B class shareholders don't get a say on board control, which explains why this $1.4 billion company is still controlled by a bunch of farmers who tolerated a "whatever it takes" culture.
However, the right to vote is indeed an asset that has some value, albeit not transferable in the case of AWB. Farmers wouldn't have spent years haggling to retain voting control as part of the privatisation if it didn't have some value to them.
The biggest cloud continues to hang over former Nationals leader and deputy prime minister John Anderson, who dumped his AWB shares on 10 October last year, three weeks before the Volcker report was released.
Anderson forgot to disclose this for four months and still hadn't disclosed his A class shares until Sunday did it for him yesterday. And he still hasn't disclosed the size of his holding in B class shares, which we suspect probably raised a six figure sum.
Another important question is how Anderson got those shares in the first place. What role did he play in the demutualisation debate when the government effectively gifted the AWB to growers such as Anderson?
The old Crikey mantra of "disclose, disclose, disclose" comes to mind here. Information is power in the modern world and sunlight is indeed the best disinfectant. When in doubt, disclose – and that should include the size of each shareholding.
3. Bob Carr's latest inappropriate earner
By Stephen Mayne
Anne Davies produced this interesting story in The SMH on Saturday about Bob Carr's newest gig – a consultancy with billionaire Dick Pratt and his Visy recycling and packaging empire.
Putting aside the moral questions of agreeing to work for an outfit that has allegedly run an illegal cartel ripping off customers for the past few years, there is the even more important consideration of policy benefits that the Carr Government delivered to Visy over the years. Davies listed the connections between Visy and the NSW Government as follows:
The State Government is responsible for many policy areas that affect Visy's business. The state-owned Forests NSW runs plantations and Visy uses its timber. It also governs the water and energy industries and sets rules on recycling of packaging. The state public service is also a big customer of Visy products and services. For example, NSW Parliament uses Visy for its recycling.However, it goes further when you consider the fast-tracking of Visy's huge pulp mill at Tumut, complete with sweetheart timber supply deals. The Howard Government handed over a whopping $40 million grant to Visy when the first $450 million Tumut project went ahead in the late 1990s and there have been more generous contributions from both levels of government with stage two.
There is also a sweetheart power supply deal for Visy's Smithfield recycling plant although this Carl Scully spray makes it clear the deal was done by the previous Liberal government.
Under that stuff-up, BHP and US firm Sithe Energy built a $400 million plant on Visy's Smithfield site and the NSW government utility Integral Energy agreed to take the 160 MW of electricity at an exorbitant $55 per MWh, about double the market price at the time, whilst Dick saved $1 million a year taking the steam for his plant.
We should not be surprised that Visy and Carr have joined forces because Pratt is arguably Australia's most prolific influence-acquirer through political, union and cultural connections. When self-declared rising Labor star Bill Shorten got engaged, Pratt hosted the function at his Melbourne mansion. Similarly, Bob Hawke, Gough Whitlam, Nick Greiner and former Victorian Premier Sir Rupert Hamer have all been on the Visy payroll over the years.
Given Bob Carr's passion for environmental issues, this hiring makes more sense than joining Macquarie Bank, but it is still far too premature given he only left parliament eight months ago.
NSW Opposition leader Peter Debnam will write to ICAC highlighting the earlier recommendations from the corruption watchdog that Ministers have a two-year cooling off period before taking up such gigs, but his comments smack of hypocrisy given the disgraceful performance of former Howard Government minister Peter Reith, Richard Alston, Michael Wooldridge and Larry Anthony in doing exactly the same as Carr.
Check out Crikey's list of what retired ministers are doing now and send through any corrections or additions to smayne@crikey.com.au.
5. Graeme Samuel creates $1.1 billion over the weekend
By Stephen Mayne, happy Toll and Patrick shareholder but...
Graeme Samuel's remarkable Saturday afternoon backflip in approving the revised Toll Holdings bid for Patrick Corp has made him the pin-up boy of the markets this morning after the value of both companies soared by $1.1 billion to a combined $11 billion.
Toll has gone from a reputation-challenged $4.297 billion company to visionary fast-growth takeover machine capitalised at $4.738 billion after the stock soared 91c to $14.28 in late morning trade.
The intra-day high of $15.20 was a new record for Toll and Patrick also hit a record after surging 91c to $7.89, lifting its market capitalisation from $4.897 billion to $5.535 billion.
All this new value will have to come from somewhere and that is the long-suffering customers who will face an unprecedented transport and logistics powerhouse in Toll, even after all these additional undertakings to the ACCC, most importantly the sale of 50% of Pacific National.
That Samuel went from emphatically rejecting the takeover to strongly endorsing it clearly surprised Alan Kohler as you can see from yesterday's Inside Business transcript. Ali Moore was a little softer on Business Sunday as Samuel really went on the offensive to sell his controversial decision.
Chris Corrigan is staying mum this morning, merely saying that Patrick awaits a "substantially revised" Toll takeover offer within two weeks. However, don't be surprised if Patrick now goes ahead and does a deal with Linfox.
Check out the statements from Toll, Patrick and the ACCC here. Does anyone else sense that Samuel didn't have the stomach for an expensive court battle?
After all, ASIC is apparently regretting taking on Jodee Rich over the One-Tel collapse as it just received an additional $4 million from the government and has now spent $20 million, whilst Rich is up to $11 million in defence costs alone. Under the settlement with the ACCC, Toll will pay its legal costs.
Australia already has one of the most concentrated corporate sectors in the world and the nation has suffered from mergers such as Coles and Myer in 1985 and News Corp's takeover of the HWT in 1988. Similarly, the failure to unbundle Telstra hasn't helped anyone.
Our financial system is now dominated by the big banks, the demise of Franklins gave us a supermarket duopoly like no other and now we face an unprecedented transport powerhouse which will be great for shareholders, but what does it mean for customers, the public and the broader economy?
26. AGL goes hostile on Alinta
By Stephen Mayne, shareholder in AGL and Alinta
Australia's second oldest listed company, AGL, has taken the battle to its five year old predator Alinta by launching a counter-takeover this morning. AGL has dumped its own demerger plan, which has cost tens of millions already, and instead wants to buy Alinta and then do its own demerger of the combined business.
AGL chairman Mark Johnson has today acknowledged the "compelling" case of putting the two infrastructure businesses together, so now it comes down to a beauty parade over which management team is best suited to do the job.
AGL should easily win any test of financial strength because it is three times the size of Alinta, but its David-like predator has snapped up a 19.9% stake and is now AGL's largest shareholder after spending $1.8 billion on the market at $19.50 a share.
AGL shares rose 20c to $18.63 this morning while Alinta gained 23c to $10.65. AGL is offering 0.564 of its own shares for each Alinta share, which is a similar ratio to Alinta's initial proposal of 1.773 of its shares for each AGL share.
This sudden change of tack makes AGL's telemarketing campaign last week seem a little odd, as an AGL shareholder explains:
I just got a phone call from AGL – it was a recorded message from chairman and Macquarie Bank co-founder Mark Johnson about the Alinta takeover bid.Indeed, I can't remember the last time two companies went hostile at each on the basis that a merger makes sense but agreement can't be reached on who'd run the show and the fine detail of the structure.
He opened up by saying AGL have their de-merger proposal on the table which they believe is in the best interests of shareholders, and now Alinta (he failed to point out they were advised by his department at Macquarie Bank), has come along with a proposal which is "complex and incomplete".
The thrust of the message was that shareholders should sit tight for the time being, and he'll be writing to us shortly. Last week, a real live human left a message on my answering machine on behalf of AGL and the woman was pushing similar lines.
Takeover battles aren't what they used to be!
28. Alan Wood's Future Fund recklessness
By Stephen Mayne
The Australian's economics editor Alan Wood is normally regarded as the driest business commentator going around. When Jeff Kennett slashed spending 10% across the board in 1993, one of his colleagues remarked "Even Woody will be impressed with this."
This makes his column about The Future Fund on Saturday all the more bemusing, because Woody brazenly declared the following:
Unfunded public service liabilities are not a problem. The size of the liability is not large relative to future budgets and will steadily decline now the Government has closed off most of its defined benefit funds.Earth to Woody – here's a table showing how unfunded super has blown out during the Howard years and the forecasts going forward:
| Financial Year | Unfunded Liability |
| 1995-96 | $69.03bn |
| 1996-97 | $68.87bn |
| 1997-98 | $69.33bn |
| 1998-99 | $71.35bn |
| 1999-00 | $71.35bn |
| 2000-01 | $71.93bn |
| 2001-02 | $81.97bn |
| 2002-03 | $89.04bn |
| 2003-04 | $91.54bn |
| 2004-05 | $98.67bn |
| 2005-06 | $94.65bn |
| 2006-07 | $98.11bn |
| 2007-08 | $101.34bn |
| 2008-09 | $104.69bn |
Peter Costello has publicly predicted the liability could hit $140 billion by 2020 and if that is "not large" then I don't know what is. Woody then adopts a Whitlamesque stance by quoting Nicholas Barr from the LSE as follows:
Pensioners are not interested in money but in consumption – food, clothing, heating, medical services, seats at football matches and so on. Money is irrelevant unless the production is there for pensioners to buy.Stick it on the credit card, she'll be right mate. Woody's fiscal recklessness shows no bounds when he concludes his column thus:
We are already stuck with the $18 billion the Commonwealth is going to tip into the fund from its deposits with the RBA, and probably this year's budget surplus, and, say, $25 billion from the sale of the remainder of Telstra – around $60 billion. But please, not one cent more.Think about how much better off we'd be today if the Howard Government had injected an additional $5 billion a year into its super funds from 1996, rather than tolerating a $29 billion blow-out. Given the spectacular returns over the past decade, we'd now have a $100 billion fund. Imagine the bonanza for taxpayers if they'd transferred 20% of the Commonwealth Bank into it at $10 a share in June 1996.
The stupidest thing about the Future Fund is that it is being created at all – let alone at the height of an asset bubble. The money should simply be paid into the existing CSS/PSS schemes like any other employer superannuation contribution. However, CSS/PSS is run by Stephen Gibbs, a former official from the Australian Services Union, and the Howard Government wouldn't want to actually give employees investing and voting power over their own hard-earned money.December last year. In the second game, Australia racked up 322 and then had heart failure as the Kiwis got to within two runs. But then in the next game, Australia scored 7/331 and watched New Zealand win with an over to spare.
If the ability of our bowling attack to defend a huge total was a cause for concern then, what about now? Looking to the future is great but Clark and Lewis aren't teenagers and it appears they're not up to it, so how would it be worse to have experienced and more reliable bowlers like Gillespie, Kasprowicz or even Bichel charging in?
After last night, things have to change.
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