Babcock, AWB, Macquarie, Gunns and James Hardie
February 2, 2010
Dear Mayne Reporters,
First things first, check out this table which shows how Babcock & Brown and Macquarie Group have presided over the destruction of more than $40 billion in value from these various 52-week highs across all 19 ASX-listed vehicles:
And that was before today's route when Babcock & Brown shares tanked $1.06 to a record low of $3.45. Thankfully, we showed some discipline and sold 300 at $4.02 a pop yesterday, but the overall loss now exceeds $500 after the purchase of 600 shares at $5 a pop late last week. This one looks like it might be going to zero.
Babcock & Brown is clearly dead as a fund manager, the only question now is how much value can be salvaged from an orderly sale of its $60 billion-plus in assets. The disaster which was the sale of Babcock & Brown Power's Tamar Valley power station to the Tasmanian government for only $100 million smacked of desperation and raised question marks over the book values of the entire group.
The rumors are everywhere that CEO Phil Green and executive chairman James Babcock are set to quit. They should get on with it and former BT executive Ian Martin is the man to step up as the new independent chairman. And if Phil Green isn't facing personal margin call questions at these levels I'd be very surprised.
The obvious governance question in this mess revolves around the on-going payment of fees by the sagging satellites to the mother-ship. Tony Boyd had a good column on Business Spectator tonight pointing out that the proposed $24 million in fees from BB Power to B&B for 2007-08 is an absolute scandal. After all, shouldn't the money be going the other way given the BB Power has now taken a $451 million write-down on its Alinta assets.
My mail is that the BB Power board is contemplating a dramatic move that will enrage its old parent. Independence and a name change, anyone? They could do worse.
AWB going down to the wire
The big governance event this week will be the AWB EGM on Thursday when the reformist majority on the board have a second crack at constitutional reform to end the farmer gerrymander which mandates that 7 of the 11 directors must be grain growers.
Requiring 75% support from farmer shareholders to succeed, I reckon this one will go down to the wire and could well be determined by the size of the turn-up on the day. No doubt both sides will be bringing them in from everywhere and this EGM will be one to remember.
The Weekly Times has been running a ridiculous campaign against reform led by journalist Peter Hemphill, such that AWB CEO Gordon Davis and yours truly both had letters published in successive weeks to put some balance into the coverage.
If reform goes down, this influential Murdoch-owned rural newspaper will have a lot to answer for. Here's the text of my letter:
Reporter Peter Hemphill and The Weekly times more generally is doing its readers a disservice by campaigning against constitutional reform at AWB Ltd. After all the past blunders and scandals, the company needs normal professional directors rather than the present farmer gerrymander.
The single desk is dead and farmers need to install a regular board to represent them commercially to replace the structure which facilitated almost $300 million in bribes to Saddam Hussein.
Farmers still control about 25% of the B class shares in AWB so they will collectively have plenty of influence in future board elections, without relying on the guaranteed majority dictated by the present constitution.
It's time to move corporate governance at AWB into the 21st century and The Weekly Times should be supporting the efforts of AWB chairman Brendan Stewart and CEO Gordon Davis who are trying to do the right thing.
Stephen Mayne
AWB shareholder
Copping a loss on Gunns
Shares in Australia's most ethically challenged listed company, Gunns Ltd, have been plunging in recent days and after buying 1500 at $1.95 on Monday, I've clearly missed the bottom after today's 17.5c plunge to a 6-year low of $1.75.
Straight-talking Leighton CEO Wal King enraged Gunns by last week declaring the pulp mill is unlikely to ever be built and this has put the frighteners into the market, along with fears of a disappointing profit result after this update on August 15.
Cripes, Tasmania's Tamar Valley really is proving to be a phenomenal value-destroying province in recent days when you consider the carnage at BB Power and now the Tasmanian tree slaughterers.
The Gunns market cap had tumbled to just $705 million, so the claimed $916 million in net assets with the interim result last February is looking rather dubious. Anyone for Gunns to join the write-down club? What does auditor MG Wallace in the Launceston office of KPMG make of all this. Unfortunately, Launceston is a rather small town so let's hope the mainland takes an interest.
History will probably show it was Babcock auditor Mark O'Sullivan and ABC Learning auditor Brian Long, both from Ernst & Young, who really blew the whistle. KPMG is yet to win a bravery award in the current market meltdown.
James Hardie and Macquarie Capital tomorrow
After a few days buried in ABC radio and television gigs, such as this Radio National panel discussion with US Skeptics founder Michael Shermer which will be broadcast on All In The Mind next Saturday, it's back into shareholder activism tomorrow with a trip to Sydney for the EGM to approve the Macquarie Capital privatisation and then the James Hardie annual shareholder information meeting.
That's all for now but we'll have another update for subscribers after tomorrow's two Sydney meetings.
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.
First things first, check out this table which shows how Babcock & Brown and Macquarie Group have presided over the destruction of more than $40 billion in value from these various 52-week highs across all 19 ASX-listed vehicles:
And that was before today's route when Babcock & Brown shares tanked $1.06 to a record low of $3.45. Thankfully, we showed some discipline and sold 300 at $4.02 a pop yesterday, but the overall loss now exceeds $500 after the purchase of 600 shares at $5 a pop late last week. This one looks like it might be going to zero.
Babcock & Brown is clearly dead as a fund manager, the only question now is how much value can be salvaged from an orderly sale of its $60 billion-plus in assets. The disaster which was the sale of Babcock & Brown Power's Tamar Valley power station to the Tasmanian government for only $100 million smacked of desperation and raised question marks over the book values of the entire group.
The rumors are everywhere that CEO Phil Green and executive chairman James Babcock are set to quit. They should get on with it and former BT executive Ian Martin is the man to step up as the new independent chairman. And if Phil Green isn't facing personal margin call questions at these levels I'd be very surprised.
The obvious governance question in this mess revolves around the on-going payment of fees by the sagging satellites to the mother-ship. Tony Boyd had a good column on Business Spectator tonight pointing out that the proposed $24 million in fees from BB Power to B&B for 2007-08 is an absolute scandal. After all, shouldn't the money be going the other way given the BB Power has now taken a $451 million write-down on its Alinta assets.
My mail is that the BB Power board is contemplating a dramatic move that will enrage its old parent. Independence and a name change, anyone? They could do worse.
AWB going down to the wire
The big governance event this week will be the AWB EGM on Thursday when the reformist majority on the board have a second crack at constitutional reform to end the farmer gerrymander which mandates that 7 of the 11 directors must be grain growers.
Requiring 75% support from farmer shareholders to succeed, I reckon this one will go down to the wire and could well be determined by the size of the turn-up on the day. No doubt both sides will be bringing them in from everywhere and this EGM will be one to remember.
The Weekly Times has been running a ridiculous campaign against reform led by journalist Peter Hemphill, such that AWB CEO Gordon Davis and yours truly both had letters published in successive weeks to put some balance into the coverage.
If reform goes down, this influential Murdoch-owned rural newspaper will have a lot to answer for. Here's the text of my letter:
Reporter Peter Hemphill and The Weekly times more generally is doing its readers a disservice by campaigning against constitutional reform at AWB Ltd. After all the past blunders and scandals, the company needs normal professional directors rather than the present farmer gerrymander.
The single desk is dead and farmers need to install a regular board to represent them commercially to replace the structure which facilitated almost $300 million in bribes to Saddam Hussein.
Farmers still control about 25% of the B class shares in AWB so they will collectively have plenty of influence in future board elections, without relying on the guaranteed majority dictated by the present constitution.
It's time to move corporate governance at AWB into the 21st century and The Weekly Times should be supporting the efforts of AWB chairman Brendan Stewart and CEO Gordon Davis who are trying to do the right thing.
Stephen Mayne
AWB shareholder
Copping a loss on Gunns
Shares in Australia's most ethically challenged listed company, Gunns Ltd, have been plunging in recent days and after buying 1500 at $1.95 on Monday, I've clearly missed the bottom after today's 17.5c plunge to a 6-year low of $1.75.
Straight-talking Leighton CEO Wal King enraged Gunns by last week declaring the pulp mill is unlikely to ever be built and this has put the frighteners into the market, along with fears of a disappointing profit result after this update on August 15.
Cripes, Tasmania's Tamar Valley really is proving to be a phenomenal value-destroying province in recent days when you consider the carnage at BB Power and now the Tasmanian tree slaughterers.
The Gunns market cap had tumbled to just $705 million, so the claimed $916 million in net assets with the interim result last February is looking rather dubious. Anyone for Gunns to join the write-down club? What does auditor MG Wallace in the Launceston office of KPMG make of all this. Unfortunately, Launceston is a rather small town so let's hope the mainland takes an interest.
History will probably show it was Babcock auditor Mark O'Sullivan and ABC Learning auditor Brian Long, both from Ernst & Young, who really blew the whistle. KPMG is yet to win a bravery award in the current market meltdown.
James Hardie and Macquarie Capital tomorrow
After a few days buried in ABC radio and television gigs, such as this Radio National panel discussion with US Skeptics founder Michael Shermer which will be broadcast on All In The Mind next Saturday, it's back into shareholder activism tomorrow with a trip to Sydney for the EGM to approve the Macquarie Capital privatisation and then the James Hardie annual shareholder information meeting.
That's all for now but we'll have another update for subscribers after tomorrow's two Sydney meetings.
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.